P L D 1992 Federal Shariat Court 1 (PLP)

TANZIL-UR-RAHMAN, C J.

These are 115 Shariat Petitions and three Suo Motu Shariat Notice Cases challenging the various provisions of "interest" provided in several statutes, namely:-- The Interest Act, 1839; The Government Savings Banks Act, 1873; The Negotiable Instruments Act, 1881; The Land Acquisition Act, 1894; The Code of Civil Procedure, 1908; The Cooperative Societies Act, 1925; The Co-operative Societies Rules, 1927; The Insurance Act, 1938; The State Bank of Pakistan Act, 1956; The West Pakistan Money-Lenders Ordinance, 1960; The West Pakistan Money-Lenders Rules, 1965; The Punjab Money-Lenders Ordinance, 1960; The Sindh Money-Lenders Ordinance, 1960; The N: W.F.P., Money-Lenders Ordinance, 1960; The Balochistan Money Lenders Ordinance, 1960; The Agricultural Development Bank of Pakistan Rules, 1961; The Banking Companies Ordinance, 1962; The Banking Companies Rules, 1963; The Banks (Nationalization) (Payment of Compensation) Rules, 1974; The Banking Companies (Recovery of Loans), Ordinance, 1979.

2. By Shariat Petitions Nos.30/I, 21/L, 27/L, 8/K of 1990, 1/K, 4/K, 32/I, 48/L, 68/L, 71/L, 56/1, 16-C/I and 17-C/I of 1991, the Interest Act, 1839, which contains only one section, has been challenged.

3. By Shariat Petition No.31/I of 1990, section 8 of the Government Savings Banks Act, 1873, has been challenged.

4. By Shariat Petitions Nos. 21/L, 27/1, of 1990, 33/1, 42/1, 69/L, 70/L, 35/1, 16-A/I, 17-A/I of 1991 and S.S.M. No.2/I of 1991, sections 78, 79 and 80 of the Negotiable Instruments Act, 1881, have been challenged.

5. By Shariat Petition No.2/L of 1991, section 34 of the Land Acquisition Act, 1894, has been challenged.

6. By Shariat Petitions Nos.21/L, 27/L, 8/K of 1990, 1/K, 4/K, 24/L, 25/L, 16/I, 17/I, 31/1, 45/1, 72/L, 74/L, 57/1 and S.S.M. No.3/I of 1991, sections 34, 34-A and 34-B and rule 2 (a) and (b) of Order XXXVII of the Code of Civil Procedure, 1908, have been challenged.

7. By Shariat Petitions Nos.27/I, 28/I, 1/L, 85/L, 30/I of 1991, section 59 (2) of the Cooperative Societies Act, 1925, has been challenged.

8. By Shariat Petition No.16/1 of 1990, section 3BB (1), clause (b) of subsection (3) of section 27, sub-clause (iv) of clause (b) and sub-clause (iv) of clause (d) of subsection (8) of section 29, 47B and clause (d) of subsection (2) of section 81 of the Insurance Act, 1938, have been challenged.

9. By Shariat Petition No.17/I of 1990, section 22 (1) of The State Bank of Pakistan, 1956, has been challenged.

10. By Shariat Petitions Nos.51/I, 64/1, 65/1, 66/1, 67/1 of 1991, sections 2(k), 2(1), 16-and 20 and Rule 27 of The West Pakistan Money Lenders Ordinance, 1960, have been challenged.

11. By Shariat Petitions Nos.14/I, 19/1, 17/L, 33/L, 68/1, 72/1 of 1990, 13/L, 27/L, 34/L, 36/L, 39/L, 22/1, 39/1, 33/L, 41/L, 44/1, 60/L, 46/1, 47/1, 46/1, 48/1, 54/1, 62/L, 79/L, 69/1, 68/1 of 1991, rule 17 (1) (2) of The Agricultural Development Bank of Pakistan Rules, 1961, has been challenged.

12. By Shariat Petition No.18/I 1990, section 25 (2) of The Banking Companies Ordinance, 1962, has been challenged.

13. By Shariat Petition No.21/1 of 1990, rule 9 (2) and (3) of The Banking Companies Rules, 1963, has been challenged.

14. By Shariat Petition No 20/I of 1990, rule .9 of the Banks Nationalization (Payment of Compensation) Rules, 1974, has been challenged.

15. By Shariat Petitions Nos.12/L, 21/L, 7/K, 27/L, 73/1, 13/L of 1990, 1/K, 17/L, 18/L, 26/L, 29/L, 30/L, 31/L, 32/L, 26/1, 28/L, 43/1, 42/L, 21/L, 49/L, 50/I, 67/1, 73/L, 76/L, 66/L, 89/L, 90/L, 91/L, 93/1, 58/1, 16-B/1, 17 B/I of 1991, sections 8 (1), 8(2)(a), 2(d), 7(2), 13, 25(2), 26-A of The Banking Companies (Recovery of Loans) Ordinance, 1979 have been challenged. Since a common question relating to `Interest' is involved in all these matters we intend to decide them all by this judgment. .

16. When the jurisdiction of this Court got restored to examine the fiscal laws since June 26, 1990, a number of Shariat Petitions were filed in this Court, challenging various fiscal laws containing provisions regarding interest therein.

17. This Court on 11th December, 1990, 6th January, 1991, 13th January, 1991, 23rd January. 1991 and 24th February, 1991, admitted to regular hearing the several Shariat Petitions, challenging a number of provisions of the fiscal laws relating to interest filed by that time. Further Shariat Petitions of similar nature continued being filed in this Court challenging the provisions of several laws relating to interest, which were admitted from time to time. Hearing of the last petition on interest concluded on 24-10-1991.

18. In order to decide these Shariat Petitions, the Court prepared a questionnaire relating to the impugned fiscal laws and sent it to distinguished `ulema, scholars, economists and bankers of the country and abroad for their opinions to the said questions. The questionnaire reads as under:- (1) What is the definition of Riba according to the Holy Qur'an and Sunnah of the Holy Prophet (p.b.u.h.). Does it cover the simple and compound interest existing in the present day financial transactions? (2) If banking is based on interest-free transactions, what would be its basic practical shape in conformity with the Injunctions of Islam? (3) (i) Does the interest on loans floated by the Government to meet national requirements come under Riba ? (ii) What alternatives can be suggested for the banks in case they grant loans without interest for various requirements? (4) Can, in the light of the Injunctions of Islam, any differentiation be made between private and public banking in respect of charging of interest on banking facilities or services rendered? (5) (i) Can the capital, according to the Injunctions of Islam, be regarded as an agent of production thus requiring remuneration for its use? (ii) Does devaluation of the currency affect the payment of loans taken before such devaluation? (iii) Can inflation causing rise in the cost/value of gold and consumer goods in terms of currency have any effect on the sum borrowed? (6) What would be the alternatives in the context of present day economic conditions to carry on domestic and foreign trade efficiently without availing of banking facilities based on interest? (7) Is interest permissible or otherwise on the transactions between two Muslim States or a Muslim and non-Muslim State? (8) Is it possible to carry on insurance business otherwise that on the basis of interest? (9) Does interest accruing the Provident Fund come under Riba (10) Can the payment of prize money on Prize Bond or Saving Bank Account or other similar Schemes be regarded as Riba ? (11) Would it be lawful under Islamic Law to differentiate between business loans on which interest may be charged and consumption loans which should be free of interest? (12) If interest is fully abolished, what would be the inducements in an Islamic Economic System to provide incentives for saving and for economising the use of capital? (13) Can an Islamic State impose any tax on its subject other than Zakat and Ushr?

19. The following scholars, economists, ulema and bankers sent their written answers to the above questionnaire issued by this Court:- (1) Dr. S.M. Hasanuzzaman, Chief, Islamic Banking Division, State Bank of Pakistan, Karachi. (2) Dr. Ramzan Akhtar, Assistant Professor, International Institute of Islamic Economics, International Islamic University, Islamabad. (3) Mr. Zia-ul-Haq, Chief of Research, Pakistan Institute of Development Economics, Quaid-i-Azam University, Islamabad. (4) Dr. Saeedullah Qazi, Director, Shaikh Za'id Islamic Centre, University of Peshawar, Peshawar: (5) Mr. Arshad Javid, Vice-President, Non-Interest Banking Department, Habib Bank Limited, Head Office 16-Habib Bank Plaza, Karachi Pakistan. (6) Prof. Dr. Sayyid Tahir, International Institute of Islamic Economics, International Islamic University, Islamabad. (7) Mr. Nawazish Ali Zaidi, Consultant on Islamic Banking, International Institute of Islamic Economics, International Islamic University, Islamabad. (8) Maulana Gohar Rahman, Shaikhul Hadith/Muhtamim, Darul, Ulum Tafhimul Qur'an, Malakand Road, Mardan. (9) Maulana Muhammad Rafi Usmani, Shaikhul Qur'an wal Hadith and Muhtamim, Darul Ulum, Karachi-14. (10) Syed Maroof Shah Shirazi, Advocate; Village and Post Office Chinar Kot, Mansehra. (11) Prof. Dr. Ala eddin Kharofa, International Islamic University, Selangore, Malaysia. (12) Prof. Dr. Najatullah Siddiqui, International Islamic Economics Centre, Malik Abdul Aziz University, Jeddah.

20. A consolidated statement of their question-wise opinions has been prepared in this Court and is appended to this judgment as Appendix `A'. It may be read as further reference material to the issues under examination by this Court. This Appendix has been compiled by our Research Section.

21. The following scholars and economists/bankers, on request of this Court appeared and made their submissions:- (1) Mr. Mansoor Ahmad Khan, Advocate, Karachi. (2) Mr. Khadim Hussain Siddiqui, Former President, Allied Bank Limited, Karachi. (3) Dr. Hasanuzzaman, Chief of Islamic Banking Division, State Bank of Pakistan, Karachi. (4) Dr. Muhammad Uzair, Economic Advisor, National Development Finance Corporation of Pakistan, Karachi. (5) Dr. Muhammad Hussain, Director, International Islamic University Islamabad. (6) Dr. Faiz Muhammad, Director-General, International Institute of Islamic Economics, International Islamic University, Islamabad.

22. The Court during its sitting at Karachi heard Mr. Mansoor Ahmad Khan, a well-known Advocate, as amicus curiae, who happened to be a member of the Banking Delegation, sent abroad by the Government in 1987. He stated that bank interest is banned in Islam. The banks may, however, run their business on profit/loss sharing or Mudarabah system. He proposed that merchant banking system may be established in Pakistan and the banks may enter into business and earn profit on the money deposited with them and share it with the depositors.

23. He submitted a copy of the Report of the Pakistan Banking Delegation[Other Members included Mr. S. Nasim Ahmad, Director National Bank of Pakistan as Convener and Co-ordinator, Dr. Syed Riaz-ul-Hassan Gillani, Deputy Attorney General, Government of Pakistan, Mr. Abdul Latif, Joint Secretary, Company Law, Government of Pakistan and Mr. S. Safwan Ullah, Senior Executive Vice-President, Bankers Equity Limited.] which was sent to certain Muslim countries to examine their banking system and other modes of financing. Being a member of that delegation he stated that almost all the Muslim economists and scholars whom the delegation met were of the view that "time-related fixed monetary return on a loan, however, conceived or planned, falls to be considered as riba prohibited in Islam." They unanimously proposed that banking system must be based on profit/loss sharing. Relevant extracts from his Report as referred to by the learned counsel have been incorporated in Appendix `A'.

24. The Court also heard a highly experienced banker, Mr. Khadim Hussain Siddiqui of Karachi, who has been President of the Allied Bank Limited. He was also member of the Panel of Experts formed by the Council of Islamic Ideology, in 1978 for eradication of interest from the country's economy. He categorically stated that bank interest comes within the definition of Riba and is banned in Islam in whatever form or for whatever purpose it may be. There is no difference between the consumption loans and productive loans so far as the prohibition of interest in Islam is concerned. He suggested that Merchant Banking is the alternate for the interest-free banking system. He further submitted that Musharakah and Mudarabah are workable systems for interest-free banking. He was of the firm view that the Interest should be abolished in one-go, not only from the Banks and other financial institutions but the Government also. No difference should be made between private Banking and the Government Banking. Partial or half-hearted measures for abolition of interest will prove abortive as is evident from the experience of the history of past ten years. He suggested that the Banks have to act as future `Holding Companies' and for that purpose structural changes will have to be made in the present banking system.

25. Regarding effect of inflation resulting in decrease in the value of money, he submitted that it should have no effect on repayment of the loans. He also referred to the Report of the Council of Islamic Ideology in this respect. He negated the impression that abolition of interest will adversely affect the savings. In his view savings have always been income-related and will have no adverse effect, if the interest is abolished, and interest-free alternatives are made available to the public.

26. The Court also heard Dr. Hasanuzzaman, Chief of Islamic Banking Division, State Bank of Pakistan, Karachi. He submitted that riba (interest) is prohibited in Islam in all its forms or purposes. Interest-free banking can be established on the basis of Musharakah and Mudarabah. He further stated that depreciation in the value of the currency should not affect the repayment of the loans. He further stated that riba (interest) is prohibited between a Muslim and non-Muslim even in a non-Islamic country. He stated that the eradication of riba (interest) will not affect the motives of saving among the people.

27. Dr. Hasanuzzaman, stressed on the fact that the present structure of banking cannot bring any ideological change. The whole structure is to be changed and reconstructed according to Islamic concepts. His views in some detail have also been incorporated in the consolidated statement of opinions vide Appendix `A'.

28. The Court also heard Dr. Muhammad Uzair, Economic Advisor, National Development Finance Corporation of Pakistan. He clearly stated that the interest whether simple or compound is unlawful (haram). There is Ijma' (consensus of the opinion) of the Ummah. In his view, an attempt to make difference between usury and interest is the result of the misgivings created by western scholars. As an alternate to the present banking system he expressed his view that Mudarabah and Musharakah are the two alternate modes of the present banking. There will be a partnership between the bank and the depositors on the one hand and the bank and its customers on the other, who would like to transact business with the banks. He stated that there may be, for example, an arrangement that the entrepreneur (or the borrower in the present day banking system) and the bank would share the profit in a ratio of 50 per cent. each, or 60 per cent. for the entrepreneur and 40 per cent. for the bank, or any such ratio which may be agreed upon between themselves. It may be regulated by the Government or the Central Bank which in the case of Pakistan will be the State Bank. Similarly, there will be an arrangement between the bank and the supplier of capital (depositors in the present banking system) for sharing the profit in the ratio of 50 per cent each or 60 per cent for the bank and 40 per cent. for the supplier of capital funds or the depositors. This may seem at first sight to be a complex arrangement, but once the system is introduced and begins to operate in our economy it will become as mechanical and routine as the present-day system wherein banks pay a higher rate of interest on certain categories of deposits while paying nothing to some types of depositors, e.g. Current-Account Holders. The source of profit for the hank is the difference between the interest it receives and the interest it has to pay to the depositors. Similarly, in the changed framework required for interest-free banking, the entrepreneurs and the bank would share the profit on an agreed percentage or ratio, a higher proportion going to the entrepreneur vis-a-vis the banks; and the depositors would share a smaller proportion of what comes to the bank. Variation in ratios may reflect different tiers of the system.

29. The percentage or the ratio for sharing the profit between the entrepreneurs (borrowers) and the banks on the one hand, and that between the banks and the depositors on the other, should be determined in the normal course of business activities and bargaining or should be regulated by the Government or the State Bank as a policy variable or a political decision by the Government, either arrangement would serve the purpose as far as the conceptual framework is concerned. Thus, contract of Mudarabah will be two fold: One between the depositor and the Bank, and the other between Bank and the entrepreneur and the customer and Bank will share the profit/loss on the ratio agreed in the contract. He was of the view that interest is prohibited whether it is transacted by the Government or the Bank or individuals. In his view, indexation caused due to inflation in the cost/value of some goods cannot be adopted as an alternate to interest for ideological as well as practical reasons. The abolition of interest in his view will have little bearing on saving as the saving has always been income-related.

30. He further submitted that devaluation in the currency shall not affect the return of loan taken before such devaluation and the loans shall be re payable in such quantity in which they have been taken irrespective of the value of the currency in the market. He also contended that Prize Bond and other saving schemes come under riba and are thus prohibited. Regarding insurance he contended that it can be based on non-interest system as has been in practice in some Muslim countries like Malaysia and Sudan.

31. The Court during its sitting at Islamabad heard Dr. Muhammad Hussain, Director, International Institute of Islamic Economics, International Islamic University, Islamabad. He submitted that riba (interest) is prohibited in Islam in all its forms. He explained the definition of riba (interest) and relied upon the definition of a Hanafi jurist, Abu Bakar Al-Jassas who defines riba as "time-related fixed monetary return on a loan": He thus submitted that bank interest comes under the prohibited ribs. He 'stated that banking system in an Islamic economy can be based on Musharakah and Mudarabah. He referred to the Report of the Council of Islamic Ideology on the elimination of interest and of other Seminars arranged by their Institute on the elimination of interest and indexation and pointed out that there are alternates available in the field of interest-free banking, if the Government really intends to eliminate riba (interest). He further submitted that depreciation in the value of the currency shall not affect the recovery of loan taken before such depreciation. He explained that all Bond Schemes come under the category of the prohibited riba.

32. The Court also heard Dr. Faiz Muhammad, Director-General, International Institute of Islamic Economics, International Islamic University, Islamabad. He submitted that interest is prohibited in all its forms and that usury and interest are one and the same thing. He related the history of Jew merchants who first started charging interest in the western countries in sixteenth century and developed the modern interest-bearing capitalistic system. He further enunciated that riba, in any form it may, is prohibited and all Bond Schemes wine under riba. He, however, submitted that some `ulema' of Pakistan were in favour of Prize Bond Scheme but when their function was explained to them, they retracted from their earlier view. He also referred to the Seminars arranged by the International Institute of Islamic Economics, International Islamic University, Islamabad, on the elimination of interest and stated that all the participants of the Seminars were unanimous that bank interest comes under the category of the riba prohibited in Islam and that any form of profit-loss sharing like Mudarabah and Musharakah be established in banking system and interest should be eliminated.

33. The Court heard the petitioners who were not represented by their counsel. All the petitioners and their Advocates contended that bank interest is prohibited in Islam. Most of them relied upon Verses 2:275-278 of the Holy Qur'an and three judgments of one of us, Dr. Tanzil-ur-Rahman, Judge, High Court of Sindh (as he then was) reported as Messrs Bank of Oman Limited v. Messrs East Trading Company Limited and others (PLD 1987 Kar. 404), Irshad H. Khan v. Parveen Ajaz (PLD 1987 Kar. 466), and Habib Bank Limited v. Muhammad Hussain and others (PLD 1987 Kar. 612 at 629) wherein Bank interest and the interest contracted on Promissory Note was refused to be decreed and the provisions containing in a number of enactments relating to interest were held as repugnant to the Injunctions of Islam as laid down in the Holy Qur'an and Sunnah of the Holy Prophet (p.b.u.h.). Some of the counsel also referred to a judgment of Mr. Justice Khalilur Rehman, of the Lahore High Court, reported as Shahbazud Din Chaudhary and 27 others v. Messrs Services Industries Textiles Limited and 4 others (PLD 1988 Lah. 1), wherein the learned Judge, inter alia, observed that in view of the clear and unequivocal Injunctions of the Holy Qur'an and Sunnah of the Holy Prophet (p.b.u.h.), the respondent company is required to take corrective measures and the mode of investment will have to be changed, whereas some others referred to two judgments of Mr. Justice Wajihuddin Ahmad, reported as Aijaz Haroon v. Inam Durrani (PLD 1989 Karachi 304) wherein the learned Judge in view of the Constitutional provisions read with Objectives Resolution came to the conclusion that the interest as such was prohibited, but the creditor can be compensated on the basis of indexation due to inflation and Tyeb v. Messrs Alpha Insurance Co. Limited and others (1990 CLC 428) wherein the above view was adopted by the learned Judge.

34. Mr. Rashid Murtaza Qureshi, Advocate, referred to the Jewish Encyclopaedia Britannica and a book titled "Pawns in the Game" by Willium Guy and submitted that Jews had dominated the Western world by accumulation of wealth through charging interest on loans and other financial transactions.

35. Malik Allah Yar, Advocate, referring to several Verses of the Holy Qur'an on interest submitted photostat copies of a number of commentaries (Tafaseer) on the Holy Qur'an and several books on Ahadith.

36. Syed Afzal Haider, Advocate, appearing for one of the petitioners relying on Karachi judgment reported as Messrs Bank of Oman Limited v. Messrs East Trading Company Limited and others (PLD 1987 Kar. 404) on the question of ribs referred to the concept of Sunnah.

37. Mr. Muhammad Ismail Qureshi, Advocate, appearing for one of the petitioners referred to two Ahadith from Mu'tta Imam Malik and Bukhari, on the question of riba, besides referring to the Qur'anic verses.

38. Mr. Khalid M. Ishaq, Advocate, who appeared on 10-6-1991 on behalf of National Bank of Pakistan and State Life Insurance Corporation, filed interim written reply on behalf of his clients and raised the following pleas:-- (i) The Banks in Pakistan are working within the framework of Banking instruments prescribed by the State Bank, with the approval of Council of Islamic Ideology, as valid Islamic instruments. (ii) There is a considerable juristic opinion available to the fact that an increase to offset the inflation would have legal justification and would not be counted as ribs; and (iii) There is juristic opinion available to the fact that Bank interest does not fall in the category of prohibited ribs (interest). According to his opinion, Banks participate in the productive processes of the Society/Community, make productive labour possible, increase social wealth, and take only a fraction of the profit that accrues to them which is not riba.

39. As regards the first plea that the Banks in Pakistan are working within the framework of Banking instruments prescribed by the State Bank, "with the approval of the Council of Islamic Ideology", the learned counsel referred to page 67 and onwards of the Council's Report on "Consolidated Recommendations on the Islamic Economic System" which, in fact, was the comment of the Ministry of Finance on interest-free Banking system. He was, therefore, pointed out that it was the stand of the Government. For the Council's view, his attention was invited by the Court to page 73 onwards, wherein the reply appears to have been given by the Council of Islamic Ideology to the said Ministry, which he regretted to refer and stated that he did not have the complete report with him. The learned counsel did not pursue the matter any further giving an impression to this Court that he did not want to press the same before us. In any case, the learned counsel failed to substantiate his plea. However, we have dealt with the point, but in another context, which will falsify the plea of the learned counsel.

40. So far as the other two pleas are concerned, the learned counsel referred to an article written by Mr. Justice (Retd.) Qadeeruddin Ahmad, former Chief Justice of the erstwhile High Court of .the West Pakistan published in two instalments in the issues of 28-11-1978 and 29-11-1978 of Daily Jang, Karachi, under the heading: Learned counsel's attention was drawn to the reply written by one of us (Dr. Tanzil-ur-Rahman, Advocate and Honorary Law Advisor to the Islamic Research Institute, Islamabad, as he then was) and published in four instalments in the issues of 9-12-1978, 10-12-1978, 13-12-1978 and 16-12-1978 of Daily Jang Karachi, under the heading: Since the arguments of Mr. Justice (Retd.) Qadeeruddin Ahmad were all repelled in the reply given by Dr. Tanzil-ur-Rahman, we do not feel inclined to encumber this judgment by repeating the same arguments and counter arguments. (Also published in (Quran Hakeem aur hamari zindagi) Siddiqui Trust, Karachi).

41. The Court, then asked the learned counsel to place Qur'anic Verses or Ahadith or juristic views on the two pleas for which he requested us to grant time, as he was not ready with the material. The said petitions were, therefore, adjourned to 1-7-1991, as requested. On that day, the counsel did not appear but sent a lengthy Note through his client with a request for a long adjournment after Summer Vacations which we accordingly granted.

42. In this Note, we found that about 68 pages were devoted to the concept of private property which has no relevance to the plea under consideration. In the latter part of the Note, in support of the proposition with regard to offset the inflation and thus giving legal justification for interest he has failed to quote any Hadith of the Holy Prophet (p.b.u.h.) or Athar (Asar) of any of the Companions of the Holy Prophet (p.b.u.h.) or any single opinion of the jurist, worth the name, of the past or present. He has, however, relied on a part of Verse No. 279 of Surah AI-Baqarah (Deal not unjustly and ye shall not be dealt with unjustly). It appears that the learned counsel has not understood the underlying philosophy of `Zulm' in the context of Riba. By the word (Zulm) here it means to take anything in excess or give less than the capital (with reference to the context of the three Verse;. on the subject of Riba taken together). This is (Zulm) injustice which is prohibited. The Holy Qur'an permits receiving back of the capital sum's but forbids any addition or deduction therefrom. The words (Roas Amwalakum ) do not denote their purchasing power but their actual quantity if they are in circulation. So far as the addition on the amount borrowed in case of inflation or deduction from the same, in case of deflation, is concerned the lenders or the borrowers, as the case may be, can in no way be held responsible for the same because the conditions related to that situation are beyond their control and in itself will amount to injustice (Zulm) if they are penalized for the same. That is why no Commentator of the Holy Qur'an or Hadith or a Jurist worth the name has ever approved it, in spite of the element of price variation in their times which has been the constant phenomenon. For example, as pointed out by Dr. Muhammad Hussain, Director, International Institute of Islamic Economics, International Islamic University, Islamabad, the inflation rate during the days of Imam Abu Yusuf, as compared to the period of Khulafa-e-Rashideen, had increased by fifteen per cent. We will be dealing further with this issue in some detail at an appropriate place.

43. On the next date of hearing i.e. 13-4-1991, the learned counsel submitted another written Note in support of the plea that the Bank interest does not come within the definition of Riba. By a cursory glance it appeared that he had referred to the names of original authors but had used only the secondary source in the said Note. As he had not brought the original source material, he was directed to send photostat copies of the original texts of the material written by the several authors which have been named in the said Note. On 23-10-1991 photostat copies of some of them were received in the office. They are as under:- (i) Three pages including title page of the book titled "Unlawful gain and legitimate Profit in Islamic law" by Nabil A. Saleh. (ii) Seven pages including title page of the book titled (Alfiqah alilslami adltah) volume-IV by (Adkashor wahabatul zaheeli). (iii) Four pages including title page of book titled (Tarjaman ul Quran ) by ( Abu Alkalam Ahmad) Lahore. (iv) Five pages including title page of book titled (sood) by Syed Abul Aala Maudoodi, Lahore. (v) Four pages including-title of (Zameema No.1) appended (sood) (ibid). (vi) Seven pages including title page of (Muslah sood) by Hazrat Maulana Mufti Mohammad Shafi, Mufti-e-Azam Pakistan, Karachi. (vii) Three pages including title `The Holy Qur'an' by Abdullah Yusuf Ali, Lebanon.

44. We have gone through the aforesaid Note wherein the opinions of Ibnal-Qayyim; Muhammad Abduhu, Rashid Raza, Sanhuri, Daoualibi, Shaikh Draz, Maulana Abul Kalam Azad, Maulana Abul Aala Mabdoodi, Maulana Mufti Mohammad Shafi and Dr. Wahba Al-Zuhaili are alleged to be in favour of the plea about Bank interest, as, raised by the counsel. In so far as Ibn Qayyim is concerned although the learned counsel has referred to his book I'lam al-muwaqqin, Vol. 2 page 135 but he has not taken the trouble of sending the original text. He simply referred to a secondary source as quoted by one Nabil in his book at page

27. He has also not supplied the extract of the Arabic text of Ibn Qayyim's book, though named in the very first line after citing authority of Ibn Qayyim. Same is the case with Sanhuri, Daoualibi, Sheikh Daraz, Shaikh Abduhu and Rashid Raza. No texts were sent. He has not even referred to the names of the books of these learned authors. In fact, he has taken down most of the Notes from Nabil's book listed at number one above. The credentials of Mr. Nabil are not known, as the learned counsel has not taken care to send the said book, as the same, he was told, is not available in our library. Therefore, unless and until the exact writings of the great Imams or jurists are laid before us by the counsel we are unable to place any reliance on the secondary source of the said Nabil.

45. As regards Maulana Abul Kalam Azad the pages sent by him, we regret, did neither refer to the point raised by the learned counsel nor support the view that interest on loan taken for commercial purposes is justified by Maulana Abul Kalam Azad. So far as the views of Mohammad Abduhu and Rashid Raza, as referred to by the learned counsel in his Note, are concerned they are not supported by their texts. The lecture of Daoualibi as referred to by him has also not been supplied. In any case we do not subscribe to the view of Daoualibi said to have been stated by him in a lecture, alleged to have been delivered by him in 1951, as stated by Nabil.

46. Dr. Asad Gillani, a petitioner, appeared in Court and submitted his written arguments which were endorsed by 57 Ulema, most of them were also present in Court. In his written arguments Dr. Asad Gillani, inter alia, stated that:-

47. Maulana Gauhar Rahman, also appeared in the said petition as jurisconsult for the petitioner and made oral arguments in support petition. He, in fact, referred to certain passages of his Reply submitted by him to the Questionnaire issued by this Court, which forms part of the Appendix A .

48. Mr. S.M. Zafar, Advocate, who appeared on 9-6-1991 with Hafiz SA. Rahman and Ali War, on behalf of the Federation of Pakistan and Banking Council in 16 Shariat Petitions, submitted that the stand of the Federation of Pakistan is that riba (interest) as such is prohibited in Islam and that it is the duty of the State of Pakistan to eliminate riba (interest) in all its forms from the financial institutions and the fiscal system of Pakistan. He referred to section 8 of the Shariat Act, 1991, which pertains to Islamization of Economy and the taking of steps to ensure that the economic system of Pakistan is reconstructed on the basis of Islamic economic objectives, principles and priorities, and submitted that it would require some time. He thus, prayed that the Government of Pakistan be given due time to fulfil the objectives. Subsequently on 15-10-1991. he fled his power in 27 other Shariat Petitions on behalf of the Federation and while adopting his earlier arguments, raised the following issues. In his own words:- (1) Some modern scholars opine that interest chargeable on productive loans does not fall in the category of riba prohibited in Islam. It is only the interest charged on consumptional loans which is prohibited in Islam because it does not bring any increase in the loaned money. (2) Some scholars link interest with inflation meaning thereby that depreciation in the value of currency should be compensated in deferred payments even in loans. (3) The previous contracts, under which the loans have been taken on interest and the borrowers have taken benefits from these loans, are liable to be continued. (4) As the universal economic system is based on interest, any departure from it would amount to economic collapse. (5) The Federation, as provided in Shariat Bill, has formed a Commission to suggest means and ways for the elimination of interest. This Commission is hopefully to discharge its duties, and its findings and recommendations should be awaited. He, however, requested for some days' time to send some articles and books in support of his submissions.

49. The learned counsel on 2.3-10-1991 sent photostat copies of some articles and extracts from some books alongwith a written Note which were received at the principal seat on 29-10-1991.

50. Learned counsel, in the said Note, reiterated the earlier stand taken by the Federation vide its preliminary written statement filed by him on 9-6-1991 that "the Federation considered riba as prohibited in Islam and it is the duty of the State of Pakistan to eliminate riba from the Financial and fiscal system of Pakistan", as already referred to by us in the preceding paragraph No.48. The learned counsel, however, reformulated the main issues, with some modifications, which were raised by him earlier on 15-10-1991. They are reproduced as under:- (i) Whether productive loans fall within the definition of the word `Ribs' because at the time when prohibition was ordained there was no concept of productive loan and it was merely loan lent for consumptive purposes. (ii) That as the word `Riba' has not been defined either in Qur'an or Hadith would it not fall within the area of 'Mutashabahat' and, therefore, the present system can be allowed to function till a properly considered substituted system is announced by the Commission appointed under the Shari'at Act. (iii) That based on the Maslahah' of the Ummat a silent consensus on Bank interest was adopted in the conference of Nahgatul Ulama in East Jawa, Indonesia which classified the bank interest, under the category of `Mutashabahat'. (iv) That those contracts which have been entered into and under which benefits have been received by various applicants need to be enforced on ground of equity and at least to the extent that any benefit has been received by the applicants they should be made to return it and/or the depreciation of money suffered by various banks on account of the inflation be compensated for. (v) That the Federation recommends that till the Commission appointed under the Shariat Act has completed its study and given its final decision the issue of interest be deferred as it has very close and deep links with the total economic system. The entire fiscal system of Pakistan is so integrated that taking a decision only about the system without co-relating the other, issues like inflation, paper currency, concept of banking, advancing loans voluntarily, it shall be liable to create problems and chaos, resulting in more disadvantage than benefit to the Nation.

51. The learned counsel in support of the above points or issues, annexed with his Note the following material:- (i) A photostat copy of an article titled as "A Study of Commercial Interest in Islam" by Fazlur-Rahman, MA. Institute of Islamic Studies, Muslim University, Aligarh

22 pages. (ii). A photostat copy of a printed article titled as "What is Riba exactly?" by Bro Jamari Mohtar-4 pages. (iii) Typed article titled as "Ijmak Sukuti on Bank Interest" (Silent Consensus on Bank Interest) .. ... ... Translation--6 pages. (iv). Photostat copy of an article titled as "Reflections on the Concept and the Law of Riba" by Syed Ahmad, Professor of Economics McMaster University Hamilton, Ont., Canada

11 pages. (v) Photostat copy of an article titled as "Islamic Banking and Finance" Prospects for the 1990s, by Andrew Cunningham, Middle East Economic Digest, 21 John Street, London, WCIN 2BP, England

3 pages. (vi) Photostat copy of an article titled as "The case for Ijtehad in respect of Interest on Productive Loans", by N.A. Jafarcy

3 sheets, (vii) Photostat copy of an article titled as "Islam and Productive Credit" by Sayed Yaqub Shah-4 pages. 52: - (i) The first article "A Study of Commercial Interest in Islam" by Fazlur-Rahman, Muslim University, Aligarh is, in fact, against the proposition or the issue raised by Mr. S.M. Zafar. The learned author has categorically stated that interest on commercial loans falls within the ambit of riba prohibited in Islam. The learned author has in detail opposed the view of Sir Syed Ahmad Khan and others belonging to his school of thought like Nazir Ahmed. Syed Tufail Ahmed Manghori etc. who had earlier opined that interest on commercial loans is not riba as prohibited in Islam. In fact, the learned author has written a book in Urdu titled as wherein he has elaborated his arguments in support of the opinion that interest on commercial loans is riba. We will be referring to the said book in the forthcoming pages. (ii) In the second article by Bro Jamari Mohtar the learned author appears to have discussed the arguments of both sides, viz. (i) Interest on commercial loans falls under riba; and (ii) Interest on commercial loans does not come under riba. A perusal of the article will, however, show that he has not preferred any of these opinions. He has just narrated views of both the sides. (iii) The third article, perhaps in Indonesian language, translated 'into English as "Silent Concensus on the permissibility of Bank Interest" appears to have referred to an opinion by Nahgatul Ulema, East Jawa, Indonesia, wherein the Ulama of the Advisory Council have been stated to have given verdict in favour of the permissibility of bank interest on the basis of Maslahah. But the opinion or verdict lacks in giving arguments based on the Holy Qur'an and the Sunnah of the Holy Prophet (p.b.u.h.) in its support. Moreover, the alleged 1jma' falls short of its requirements in Shari'ah. (See Al-Mustasfa by Imam Ghizali, Vol. 1 pp. 173-81). As regards the concept of Maslahah for giving permissibility to bank interest, we will deal with it separately at an appropriate place. (iv) The fourth article is "Reflections on the Concept and the Law of Riba by Syed Ahmad, Professor of Economics McMaster University, Hamilton, Canada. In this article the learned writer has discussed whether riba is identical to interest and has tried to exclude some forms of modern interest from the ambit of riba, but he has not given any argument based on the Holy Qur'an and the Sunnah of the Holy Prophet (p.b.u.h.). (v). It contains a fatwa of Shaikh Tantawi of Egypt issued on September, 1989 saying that interest on Government saving certificates is permissible in Islam. But in the same document it has been written that in 1990 most of the Egyptian Ulama have opposed this fatwa so there remains solitary opinion of Shaikh Tantavi of Egypt. (vi) Another article titled as "The case for Ijtehad in respect of interest on Productive Loans" by NA. Jafarey, Advocate for making Ijtehad relating to matters such as Riba. His view and argument is largely misconceived. Ijtehad is to be exercised in those matters about which the Holy Qur'an and Sunnah of the Holy Prophet (p.b.u.h.) do not ordain any specific Injunctions and the matter falls within the domain of juristic analogy (Qiyas). He has, however, at the end of his paper, left the matter open to the conscience of the Ummah, which has hitherto been against the validity of Bank interest. (vii) The last document is the Article written by Sayed Yaqub Shah, titled as "Islam and Productive Credit", in which he has tried to prove that interest on commercial loans was not in vogue in the period of Holy Prophet (p.b.u.h.). This opinion has been seriously questioned by Mr. Fazlur-Rahman of Muslim University, Aligarh, in his book (Tajarti sood) and the Article produced by Mr. Zafar himself.

53. Our overall assessment and view about the above material submitted b Mr.S.M. Zafar except the article listed at No.1, which straightaway goes against his proposition, to say the least, is scanty, unconvincing and rudimentary in substance and carries no weight in the face of the Injunctions of the Holy Qur'an and the Sunnah of the Holy Prophet (p.b.u.h.) and the consensus of Ummah in so far as the Riba al Nasiyah is concerned.

54. These are our short comments on the material submitted by Mr. S.M. tear. We would, however, deal in detail, with the points raised by Mr. Khalid M. Ishaque and Mr. S.M. Zafar, Advocates, two of them being similar in some respects in the forthcoming pages of this judgment, but before embarking on them, we feel it pertinent to give some historical background of the question of Riba (interest) with reference to the Constitutions of Pakistan and steps taken by the Government during last so many years with particular reference to the period of General Muhammad Ziaul Haq (late), the then President.

55. As to interest, Pakistan's Constitution, 1956 provides that the State shall endeavour to eliminate Riba as early as possible (Art.28-F), but no effort was made to realize that objective. In 1962 Constitution, it was, again, provided in the principles of policy (No.18) that Riba (usury) should be eliminated. Similar provision was again made in the Constitution of 1973, (Art. 38-F).

56. The Council of Islamic Ideology established for the first time in 1962, in order to make, inter alia, recommendations as to the measures for enabling Muslims to order their lives in accordance with the teachings of Islam, formulated its opinion as long back as in 1964-1966, that `Riba is forbidden' and the present banking system is fundamentally based on `Riba', and lastly, in its meeting held on 3rd December, 1969, it was unanimously resolved that:- (Report on Consolidated Recommendations on the "Islamic Economic System", Council of Islamic Ideology, 1983, pp.9 and 10). But the Government turned a deaf year and gave no attention to these recommendations.

57. The matter also engaged the attention of the Council during its subsequent meetings in the year 1970 and after prolonged discussions on its various aspects, a Blue-print of Islamic Social Order was finally approved. It was sent to the Government in 1971 (p.10 of the Report op. cit.), but no Legislative measures were taken for elimination of interest from the country's economy, as provided in the Constitution. (See Art. 230 of 1973 Constitution).

58. In July, 1977, after General Muhammad Zia-ul-Haq took reins of power in his hands as Chief Martial Law Administrator, addressing the Council of Islamic Ideology, reconstituted by him, on 29th September, 1977, asked the Council to give its best thought to it and submit its detailed report on the subject, as to how the curse of interest could be eradicated. The Council of Islamic Ideology appointed a panel of Economists and Bankers. [Dr. Ehsan Rashid-Chairman, Professor of Economics and Director, Applied Economics Research Centre, University of Karachi, Karachi,

2. Dr. Rafiq Ahmad, Pro Vice-Chancellor, University of the Punjab, Lahore,

3. Sheikh Mahmood Ahmad, Lahore,

4. Mr. Abdul Jabbar Khan, President, Habib Bank Limited, Karachi,

5. Dr Nurul Islam Mian, Director, Institute of Economic Studies, University of Peshawar,

6. Dr. Syed Nawab Haider Naqvi, Director, Pakistan Institute of Development Economics, Islamabad,

7. Dr. Mian Nazeer, Professor of Economics, University of Peshawar, Peshawar

8. Mr. D.M.Qureshi, Managing Director, Bankers' Equity Ltd., Karachi,

9. Professor Shakrullah, Head of the Economics Department, Balochistan University, Quetta,

10. Dr. A.H. Siddiqui, Director of Studies, Administrative Staff College, Lahore,

11. Mr. Khadim Hosain Siddiqui, Member, Pakistan Banking Council, Karachi,

12. Mr. A.K. Sumar, Karachi,

13. Mr. Abdul Wasay, Bank of Credit and Commerce International, Karachi,

14. Dr. S.M.Hasan-uz-Zaman, Chief, Islamic Economics Division, Research Department, State Bank of Pakistan, Karachi Members and

15. Dr. Ziauddin Ahmad, Deputy Governor, State Bank of Pakistan and Member, Council of Islamic Ideology, Convener.] An interim report was submitted. by the Council to General Muhammad Zia-ul-Haq, who, in the meantime, had also assumed the office of President to himself. In the light of that report some interim measures were taken by the President for the abolition of interest, whereby the House Building Finance Corporation, National Investment Trust (NIT) and Investment Corporation of Pakistan (ICP) were made to run on interest-free basis on profit and loss sharing. On 12th Rabi-al-Awwal, 1399 A.H.=10th February, 1979, as announced by the President, a time-limit of three years was set in by him for the complete abolition of interest from the country's economy. The Council of Islamic Ideology[

1. Justice Dr. Tanzil-ur-Rahman, Chairman,

2. Maulana Zafar Ahmad Ansari,

3. Mr.Khalid M. Ishaque,

4. Mufti ayyahuddin Kakakhel,

5. Khawaja Qamruddin Siyalvi,

6. Maulana Muhammad Taqi Usmani,

7. Maulana Muhammad Hanif Nadvi,

8. Dr. Ziauddin Ahmad,

9. Allama Syed Muhammad Razi,

10. Maulana Shamsul Haq Afghani,

11. Dr. Mrs. Khawar Khan Chishti-Members and (12) Mr. Fazlur Rahman Khan, Ex-Officio Member (as on 15-6-1980).] approved the Final Report on 15-6-1980 and its Chairman submitted the same to the President on June 25,1980 (p. 42 op.cit), wherein a framework was provided so as to enable the Government to eliminate interest from the country's economy by the end of February, 1982 (see Council's Report on `Elimination of Interest from Country's Economy' annexed with the consolidated Report on recommendations of the Council of Islamic Ideology on `Islamic Economic System' Part V, Appendix, pp. 1 114; also published separately). The said report came up for discussion at the International Seminar of Economists on "Fiscal System of Islam" held at Islamabad during March 7-11, 1981. The Seminar, in its Communique at the close of Seminar paid its tribute to the Council for the said Report on interest in the following words:-- "The seminar complimented the Government of Pakistan and the Council of Islamic Ideology for the intensive work done to find ways and means of eliminating Riba. It regarded the Report of the Council of Islamic Ideology on the Elimination of Interest as a historic document and a pioneering effort which would be of great use to other Muslim countries in their efforts to transform their banking system, in accordance with Islam. It was recommended that to ensure its widest possible readership it should be translated in Arabic and other languages" (Council's Report on the Islamic Economic System, December 1983, p. 45) An Arabic translation of the said Report was published by Malik Abdul Aziz University Jeddah, entitled as A summary of conclusions and recommendations in the said Report of the Council (93-114) is appended herewith and marked as Appendix B'. This summary is, however, to be read subject to the observations of this Court made herein this judgment. '

59. The Government of Pakistan on receipt of the Council's Final Report on elimination of interest took some further steps in the direction by first allowing the public the option of opening Profit and Loss Accounts in all the five nationalized Banks and, later on, reverting of interest-bearing Savings Accounts to PLS Accounts. After some time, the Government also introduced Mudarabah and Musharakah, as a step towards right direction of Islamic Financing System, as alternate to the prevailing Banking System, but on a very limited and restricted scale. The option, however, remained open with the Banks and the public to either. go in for Islamic System or stick to the non- Islamic system, hitherto maintained, based on interest.

60. It may, however, be mentioned that the Council had been against the opening of separate Interest-free counters, but the Government in manifest opposition of the Council's recommendations opened simultaneously the "interest-free counters". Soon after the Council, after re-constitution on 31-5-1981, again protested against it. Relevant extracts from the Council's consolidated Report on Islamic Economic System" are reproduced as under:--

61. In this respect, we would also like to refer to the observations of a well-known Economist, Prof. Dr. Nijatullah Siddiqui of Malik Abdul Aziz University, Jeddah. In his book "Ghair soodi bankari " (Islamic Publications, Lahore, 1969) he writes :- (Let it be noted that the Council in 1983 had also prepared a Draft Ordinance of Prohibition of Interest). (See p.117 Council's Report on Islamic Economic System, December, 1983).

62. Most probably, due to the rigors of Income-tax and Excise laws, and for other reasons. as the Council was already apprehensive, the practice of granting and receiving loans and other credit facilities on the basis of interest continued unhampered. Let us quote here from the Council's Report on `Elimination of Interest from the Country's Economy'-- "The Council wishes to stress that with a view to ensuring the success of the new system of banking, it is of paramount importance that the Government should carry out a thorough reappraisal of the tax system, focusing in particular on the need for greatly simplifying the system of income-tax. The need for this measure was earlier underscored by the Council while submitting its Report on the introduction of Zakat and it was pointed out in this context that proper collection of Zakat would be difficult to achieve so long as the Income-tax system was not simplified and made sufficiently easy for the assessees. Regretably, however, this recommendation of the Council has yet to be given effect. In submitting its present Report, the Council wishes to express its deep concern in this regard once again, particularly in view of the fact that a thorough-going reform of the income-tax system is a sine qua non for the success of an interest-free banking system. This is because of the fact that under the new system, the income of the bank would crucially depend upon the profits of the business firms which receive financial assistance from them. If the existing system of income-tax remains as it is the business firms would continue the malpractice of concealing their profits and maintaining multiple sets of accounts which would deprive the banks from their rightful share in the profits of these concerns and would thus adversely affect the earnings of the banks (Introduction, p.4, para.4)."

63. It is also noticeable that the President, General Muhammad Zia-ul- Haq, while constituting Federal Shari'at Court on 26th June, 1984, and empowering the said Court to declare a `law as void if found repugnant to the Injunctions of Islam as laid down in the Holy Qur'an and Sunnah of the Holy Prophet' excluded from the jurisdiction of the said Court the consideration of all questions relating to financial matters, including Riba.,(Refer Chapter III -A, Article 203-B (c) of the Constitution of 1973), until the expiration of three years from the commencement of the said Chapter. With the result that the question of interest was to remain outside the jurisdiction of the Federal Shari'at Court up to 25th June, 1983 (See definition of the word `law' which includes `any custom or usage having the force of law but does not include the Constitution, Muslim Personal Law, any law relating to the procedure of any Court or Tribunal 'or, until the- expiration of three years from the commencement of this Chapter any fiscal law or any law relating to the levy and collection of taxes and fees or banking, insurance practice and procedure). It is also noticeable that the said period of `three' years was substituted by `four' for the word `three' by the Constitution (Second Amendment) Order, 1983 (P.O. No.7 of 1983) section 2 (with effect from May 19, 1983), which was again substituted by the Constitution (Second Amendment) Order, 1984 P.O. No. 2 of 1984) section 2 (with effect from April 26, 1984) by the word `five' which was again substituted by `10 years' by P.O. No. 14 of 1985, Art. 2 and Schedule item 42 (with effect from March 2, 1985), that is, the bar to continue till 25th June, 1990. The said period having expired the bar stood removed and the jurisdiction with regard to examining any provision of any fiscal law or any law relating to the levy and collection of taxes and fees or banking, insurance practice and procedure now vests in this Court:

64. It is further noticeable that despite repeated demands and recommendations for removing the said ban, made by almost all "the Ulema and Mashaikh Conferences" held during 1981-88, under the auspices of the Ministry of Religious Affairs.and presided over by late General Zia-ul-Haq, the period of exclusion of jurisdiction of this Court to examine Fiscal Laws was extended from time to time, as stated above, even after the late President got a mandate for enforcement of Islam through the Referendum held in 1984, as is evident from the preceding paragraph.

65. Now, to deal with the subject of `Interest' which is a common question in all these petitions it is intended to give first its literal meaning and then its Shari'ah meaning with illustrations from the Holy Qur'an and Sunnah of the E Holy Prophet (p.b.u.h.) and its prohibition in relation to the present day practice of our Banks and other financial institutions as raised in the petitions before this Court.

66. In the Qur'an the word riba literally means: (i) to grow, e.g. "And thou beholdest the earth barren, then when We send down water upon it, it quickens and grows ....:' (XXII:5); (ii) to increase; to prosper; "rod destroy's riba, but makes alms prosper" (II: 276); "And whatever you invest in riba so that it may increase upon the people's wealth, it increases not with God;" (XXX: 39); (iii) to rise (for example of a hill), as "And We gave them refuge upon a height .." (XXIII:50); "As the likeness of a garden upon a hill " (11:265); (iv) to swell (for example, foam), as "Then the torrent carried a swelling scum;" (XIII:17); (v) to nurture; to raise (a child); as "My Lord, have mercy upon them (i.e. my parents) as they raised me up when I was little; (XVII:24); "Did we not raise thee amongst us as a child?" (XXVI: 18): (vi) augmentation, increase in power, etc., as "He seized them with a surpassing grip .... " (LXIX:10); "That one nation be more powerful than another nation ...." (XVI:92).

67. According to the above Qur'anic illustrations, the literal meaning of riba is, `increase'. In Shari'ah it means "an addition, however slight, over and above the principal", and thus includes both usury and interest. (See: Lanes's Arabic--English Lexicon). This finds support from the best authorities on Arabic language like Imam Raghib Isfahani and Zubaydi. Refer their Encyclopaedic works: Mufradat al-Qur'an and Taj al-Arus.

68. The word "interest", by and large, has now been accepted and is understood as Riba (See Staengass English--Arabic Dictionary, Lahore, 1979, the word "interest").

69. Riba Usury, as defined in "A Dictionary of Islam" by Thomas Patrick Hughes, Lahore, 1964, page 544 means "A term in Muslim law defined as "an excess according to a legal standard of measurement or weight, in one or two homogeneous articles opposed to each other in a contract of exchange, and in which such excess is stipulated as an obligatory condition on one of the

70. The word riba appears to have the same meaning as the Hebrew neshec, which included gain, whether from the loan of money, or goods, or property of any kind. In the Mosaic law, conditions of gain for the loan of money or goods were rigorously prohibited. See Exold. xxii. 25; Lev. xxv. 36

71. Therefore, Riba includes both `usury' and `interest' as known in English terminology. In legal sense, it is that excess amount which a "Creditor" settles to receive/or recover from his "Debtor" in consideration of giving time to the said debtor for re-payment of his loan. Imam Tabri (d.310 A.H.) in Tafseer Tabri(Vol. III, p.64) commenting on the Qur'anic verse writes that:- that is, Riba is that increase (financial) which an owner of valuable property (Mal) receives from his debtor for giving him time to repay his debt.

72. Ibn al-Athir, in his famous work Kitab al-Nihavah fi-Gharib al-Hadith wa'1-Athar Cairo, 1322 A.H. Vol. 11, p. 66 says:- (The original meaning of riba is excess and in the terminology of the Shari ah. It means increase in the principal without any contract of sale having

73. Ibn 'Arabi in his notcd work, Ahkam al Qur'an, Cairo, 1957, Vol. 1, p. 242 has defined riba to be the name of every increase in lieu of which there is no consideration viz. property, (Mal): This is the definition which Allama Burhanuddin al-Marghinani (d. 593 A.H.) has also stated in his famous book, Al-Hidayah (See Al-Hidayah, Qur'an Mahal, Karachi, Kitab-al-Buu' Sing. Bai (Sale) Chapter on Riba (Vol. III, p.78), which reads as under:- Riba, in law, signifies an excess (increase) in a (loan) contract in which such' excess is stipulated as an obligatory condition on one of the parties, without any return, i.e. without any property (Mal), in exchange. (See Book XIV on Sale Chapter VIII on Riba or usury. Hidayah, English Translation by Hamilton, Lahore, page 289), Imam Fakhrud-Din Al-Razi (d. 606 A.H.) in his well- known Tafsir al Kabir writes that the meaning of the word Riba is increase but it does not mean that to recover every kind of increase is Riba and is unlawful . The forbiddance of Riba relates to a special kind of contract which was known amongst the Arabs as Riba al Nasiyah i.e. increase on debt. (The other kind of riba called "Riba al-Fadl" is outside the scope of the present discussion).

74. Al-Jassas in Ahkam al-Qur'an (Istambol, 1335 A.H. Vol. 1, p.469) defines the term `riba' as follows: (Riba is the loan given for a specified period on condition that on the expiry of the period, the borrower will repay it with some excess.)

75. Maulana Mawdudi has stated the definition of riba as follows:

76. Even in common law parlance "interest" has been held as "The excess over the original advance is certainly the compensation which the creditor gets for lending his money for the particular period. The fact that it is not described in so many words as interest will not alter its character". (A I R 1944 Mad. 243).

77. Halsbury's Laws of England, Vol. 23, S. 253 defines interest as follows:-- "Interest when considered in relation to money denotes the return of consideration or compensation for the use of retention by one party of a sum of money or other property belonging to another."

78. It can thus be concluded that interest is not an increase simpliciter but in the Shari'ah it is a special kind of increase, otherwise in Bai' (sale), there is an increase which is termed as profit, whereas Riba is the consideration or compensation for the period of re-payment of loan. Since this `period' is not a valuable property (Mal), its return has been declared as unlawful, whether it be money or any other thing. In other words, wherever there is money from the One Part and there is only grace period or deferment of the repayment of loan on the other, and for that a `return' is stipulated it is Riba. On a careful study of several forms of commercial activities and credit transactions, prevalent among Arabs during the period of Holy Prophet a transaction which contains excess or addition over and above the principal amount of loan, which is pre determined in relation to time or period to be conditional on the payment of that pre-determined excess or addition, payable to the creditor (such a transaction containing the said elements) constitutes Riba and any sale, transaction or credit facility, in money or in kind, has been considered to be a transaction of Riba, which is unlawful, Haram in territory of Islam, (Dar al Islam in Muslim society. There is consensus (Ijma) of the Muslim jurists on it.

79. The word Riba in its various linguistic forms has been used at about 20 places (See: S.II-265, 275, 276, 278, III: 130, IV: 161, XIII: 17, XVI, 92, XVII 24, XXII: 5, XXVI: 18, XXX: 39, XLI: 39, LXIX: 10) in the Holy Qur'an. The relevant for the present discussion are the following verses:- "Those who live on usury will not rise (at Resurrection) but like a man possessed of the devil and demented. This because they say that trading is like usury. But trade has been sanctioned and usury forbidden by Allah. Those who are wanted by their Lord and desist will keep (what they have taken of interest) already and those who revert to it again are the residents of Hell where they will abide for ever.

80. Allah takes away (gain) from usury, but adds (profits) to charity: and God does not love the ungrateful and unjust. O believers, fear Allah and forego the interest that is owing if you really believe. If you do not, beware of war on the part of Allah and His Apostle. But if you repent, you shall keep your principal. Oppress none and no one will oppress you. If a debtor is in want, give him time until his circumstances improve, but if you forego (the debt) as charity, that will be to your good, if you really understand. Have fear of the day when you go back to Allah. Then each will be paid back in full his reward and no one will be wronged." O you, who believe, do not practise usury, charging doubled and redoubled (interest): but have fear of Allah: you may well attain your goal. (Al-Imran 3: 130) What you invest at usury in order to increase your capital on other people's wealth, does not find increase with Allah; yet what you give in alms and charity, seeking Allah, will be doubled. (Al-Rum 30:39) (Because of the wickedness of some among the Jews and because they obstructed people from the way of Allah, we forbade them. many things which were lawful for them; And because they practised usury although it had been forbidden to them, and for usurping others' wealth unjustly. Fur those who are unbelievers among them we have, reserved a painful punishment (Al-Nisa 4:160-161) (Translation of the -above verses has been reproduced from (Prof.) Ahmad Ali's "Al-Qur'an" a contemporary translation" (with the only substitution by Allah for God).

81. It is stated in Al-Muntakhab fi Tafscer Al-Our'an Al-Karim written by a Committee of the Qur'an & Sunnah of the Supreme Council of Islamic Affairs Ministry of Auqaf, Arab Republic of Egypt, that: "Riba stated in the Verse (II-275) is a Riba prevalent among Arabs in the pre-Islamic era and that is the increase in loans in lieu of period of time (granted to the debtor for repayment of loan), and that is unlawful (riba ) whether it (riba) be less or more. Reference may also be made to Alkashshaf An Haqa'iq Ghawamid al-Tanzil by Imam Jarullah Mahmood bin Umar al-Zamkhshari (d. 528 A.H.) Vol. 1, pp. 319 - 323).

82. Muhammad Ali al-Sabuni (now based in Saudi Arabia) in his Tafsir Ayat al Ahkam Damascus, 1397 A.H. - 1977 A.C., Vol. 1, page 383 writes that the dictionary meaning of Riba is i.e. an absolute increase (without any attribute or qualification) and in Shariah it means the increase or excess which the creditor takes from his debtor in lieu of the deferred period (for repayment of loan).

83. Syed Qutub Shaheed (may Allah have His infinite Mercy on him) of Egypt, in his notable work, Tafsir fi Zilal al-Our'an (Verses 275-81, Surah Al- Baqarah), has dealt with the question of Riba elaborately. In short, as stated by him "interest and Islam cannot remain together in a (Muslim) Society". An extract from the translation of the above Tafsir reads:

84. Late Syed Abul A'la Maudoodi in his famous book `Sud Islamic Publications, Lahore, 1961, pp. 148-49 writes that :- Reference may also be made to late Syed Abul A'la Mawdudi's "Tafhim al Qur'an Vol. 1, pp.210-18, 287-88 and

422. Also see Ma'arif al Qur'an by Grand Mufti of Pakistan, Mufti Muhammad Shari, Vol., pp. 585-622.

85. Thcae are also a number of traditions of the Holy Prophet (p.b.u.h.) which, forbid Riba. These traditions have been narrated by Imam Malik, Bukhari, Muslim, Abu Daud, Tirmizi, Nasa'i, Ibn Majah, Ahmed ibn Hanbal, Dar Outni and several other Traditionalists (Muhaddithin) in their Collections of Ahadith through various chains of authorities. Mere we may refer to few of them: (i) Muwatta, Imam Malik (Arabic-Urdu), Karkhana- i-Tijarat Kutub, Karachi, p.575. Trans. by Professor Rahimuddin, published by Sh. Muhammad Ahsraf, Lahore, 1980, page 303 states the following Traditions: (Zaid b. Aslam reported that interest in pagan times was of this nature: When a person owed money to another man for a certain period and the period expired, the creditor would say: You pay me the amount or pay thy interest. If he paid the amount, it was well and good, otherwise the creditor increased the loan amount and extended the period for payment again). (ii) Al-Tarteeb wal-Bayan by Muhammad Zaki Saleh, Vol. II, Egypt 1374 A.H. = 1957 A.C. P.234: states that: (According to Jabir, the Holy Prophet cursed those who receive and pay interest and the scribe of the deed and those who bear witness to it and said they are equal). (Muslim). (iii) Muslim has also reported from Abdullah Ibn Masud that the Holy Prophet cursed the receiver of interest as well as its giver, the scribe of the interest deed and the witnesses to it: and further said that they all are equal (in the act of committing sin). (Muslim).

86. Al-Bayhaqi (d. 458 A.H.) in his Sunan has a chapter titled as; (Every loan from which some profit accrues is riba). In this chapter there occurs the following hadith: (A Companion of the Prophet; Fudalah b. Ubayd, said that every loan from which some profit accrues to the creditor is one of the forms of riba).

87. It is also stated by AI-Suyuti (d. 911 A.H.) in his work al-Jami'.al Saghir, Cairo, 1954, p.94, as: (Every loan from which a profit accrues is riba) But this is not all. (Traditionist) `All al-Muttaqi of Burhanpur (d. 975 A.H.) has quoted this very hadith in Kanz al-`Ummal of Vol. IV, p.665.

88. Abu Dawud in his Sunan narrates: (Muharib reported that he heard Jabir b. `Abd Allah saying that the Prophet owed him (Jabir) some money and at the time of the repayment of the loan the Prophet added (some money) in excess of the principal borrowed). This furnishes an example of an unstipulated and voluntary increase.

89. For further Hadith material on the prohibition of riba, see (Masla Sud) by late Maulana Mufti Muhammad Shat, Karachi, 1979, pp. 68-99, wherein 47 ahadith have been stated).

90. Let us also refer to the last Sermon of the Holy Prophet (p.b.u.h.), in the presence of about a lac of his reverened Companions (Sahaba Karam). The following words of the Holy Prophet are very significant: (The Holy Messenger of Allah, on his last Pilgrimage and in his last address, declared the prohibition of interest in these words: "Every form of interest (Riba) is cancelled; capital indeed is yours which you shall have; wrong not and you shall not be wronged. Allah has given His Commandment totally prohibiting interest (Riba). I start with the amount of interest which people owe to Abbas and declare it all cancelled. "He then, on behalf of his uncle, Abbas, cancelled the total amount of interest due on his loan capital from his debtor).

91. Dr. Hameedullah, based at Paris and widely respected for his piety and scholarship, in his book "Muhammad Rasulullah (Sallallahualaihi wa Sallam) Karachi, paragraph 34, tracing the history of Ka'ba and writing about its repairs/construction/reconstruction at one point of time, somewhere in 605 A.C., when on a tempestuous day sparks of fire were thrown by the wind on the curtains of the Ka'ba, which caught fire and the building was burnt out, and tempest was followed by torrential rains, and these dealt the final blow, so that the building of the Ka'ba crumbled down in heaps, writes that "Contributions were asked from everybody in the town, and it was solemnly announced that for the sacred building only nest money should be offered; prostitutes and usurious peoples were asked not to contribute an bin " (underlining is mine). This implies that even among the pagans of Arabia, in those dark days of human civilization, usury (interest) was considered to be the money earned by dishonest means. We may also refer to paragraphs 144 and 226 of the same book. In a general meeting of all the population, both Muslim and non-Muslim, convened by the Holy Prophet, a constitution for the State in Madina with Buffer states around, was reduced into writing, constituting the earliest written Constitution of a State, promulgated by its Head, in the world. The Christians of Najran who were highly organized religious people and were more fanatically attached to their faith, sent a delegation to Madina consisting, among others, of a bishop and a vicar (second Priest). They voluntarily acceded to the said Muslim State of Madina, as non-Muslim subjects, and obtained a Charter which conferred on them autonomy, both religious and administrative. It was covenanted that "they need no more pay the interest to their creditors, but only the capital of the loans. Naturally he (the Prophet) asked them not to take interest themselves either in future. All was reduced to writing, and the document has come down to us".

92. Analysing the material of the Holy Qur'an and Sunnah of the Holy Prophet, referred to above, forbidding Muslims to devour interest, it is noticed that as the interest-bearing transactions were prevalent among the Arabs for a long time and it had taken roots in their economic and social life, the prohibition of interest came gradually. The injunction as contained in S.XXX : 39 of the Holy Qur an is of an advisory nature, on moral plane, that interest, in reality, does not increase the wealth, but it is the charity, seeking Allah's pleasure, that increases manifold. The other injunction (S.III : 12) forbids Muslims to take compound interest (usury), in order to be dutiful to Allah the r Almighty. so that real prosperity may come to them. Some people thought `trade' and `interest' alike. Then came the admonition that whoever devours interest will stand like the one whom Satan has bewildered and maddened by his touch. Then they were ordered to desist from taking interest and he who abstains from taking interest shall be pardoned for his past actions, but he who I repeats the same shall go to Hell, where he shall abide for ever. Then came an absolute injunction to Muslims to forego interest, if they really believe in Him and then came the warning, that if you do not forego interest, which has already accrued to you, and do not desist from taking it any further, beware of war on the part of Allah and His Apostle. This warning, in fact, implies that whoever wants to be in peace with Allah and his Apostle he is to desist from taking interest, otherwise state of war with Allah and His Prophet continues. Then came another injunction to be content with receiving back the principal amount followed by an advice that if the debtor is in difficulty, time be given to him (S.II:277-80). At the end (S.I1:281), there is a reminder to have fear of Allah and that when they will go back to Allah, on the day of resurrection, each one will be paid back for what he has earned in this world.

93. Those who are of the view that it is the interest doubled and redoubled only, which is prohibited (Verse 130 of Surah Al-i-Imran) fail to take into consideration the other verses on the subject. It is one of the accepted principles of interpretation of the Holy Qur'an that firstly the Holy Qur'an should be interpreted by the Holy Our'an itself. Therefore, for the correct interpretation of a verse in the Holy Qur'an, the other verse of the Holy Qur'an, on the subject, must be looked into and taken together to find out the real intention of the Holy Qur'an and, then, the Sunnah of the Holy' Prophet viz. his word, act and maintaining silence on one s words spoken or act done in his presence by the Holy Prophet (takreer), be called in aid for its interpretation. Therefore, some of the writers on interest who have expressed their view that it is only the `usury' (compound or excessive interest) which is prohibited or, in other words, it is the excessive rate of interest, which is prohibited and not a small percentage, to say the least, arc entirely mistaken. We may here quote a passage from a notable work of late Dr. Fazl-ur-Rahman Ansari "The Qur'anic Foundations and Structure (it Muslim Society", Begum Aisha Bawany Wakf, Karachi Vol. 11, p. 327, which reads that: "Because Riba is generally translated as usury, and because in modern parlance `usury' signifies only an `exorbitant rate of interest' some people have fallen into the error that what the Holy Qur'an has really forbidden is an excessive rate of interest. In truth, it is only a misinterpretation of the term Riba and a perversion of the Qur'anic teaching. That the Holy Book does not distinguish between `exorbitant' and `reasonable' rates of interest is clear from the Qur'anic Verse 2:278-80." In this respect, we may also refer to the verse of the Holy Qur'an (Surah Al-Maidah, 5:44) that is "Barter not my signs for a paltry gain". Does it mean that only the barter for a "small" gain/price is prohibited and if the price is "high", there is no prohibition. Only a literalist, unaware of the style and manner of expression of the Holy Qur'an will so contend. In fact, the verse implies that if the entire world is offered to a Muslim in lieu of His one "Sign", the price offered is still small and one should not sell his religion (Din) in consideration thereof. Therefore, the words (Azafa Mazafata) are to pinpoint the aggravated situation then prevailing in certain parts of Arabia, which is highly deprecated.

94. If the meaning, extent and application of riba ordinance of the Holy Qur'an is restricted to its being doubled and redoubled (Azafa Mazafata) it goes directly against the historical evidence existed throughout the Muslim; civilization that the whole interest system was banned and declared unlawful. The illat al-hukm the cause of prohibition of interest is not that of its being doubled and re-doubled, as some modernists contend, but exploitation of poor and needy as evidenced by the Qur'an itself neither doing injustice nor suffering injustice (S.Al. Baqra 11:80) and the unequivocal command in the express words: (remit what remains of riba,) leaves no room for doubt that whatever is involved by way of interest, whether big or small; simple or compound, doubled or re-doubled, in whatever form or kind, is ordered to be remitted; let alone the principal amount to return with a moral tone to give the debtor time, if he stands in need for it: (if, however, anyone is in difficulties, let there be a delay till he is able to pay even the principal amount, and: although it is better for you to give it up).

95. The case is, therefore, not that only exorbitant or excessive rate of interest is prohibited but it includes a small percentage also. The word Riba as used in the Our'an is absolute in terms, and no attribute or qualification (Wasaf) as to its quantity is to govern it, nor it has any credence (Refer: (Almuntakhib fi tafsir al Quran al Karim ) (Op. city).

96. Some modernists, including Yaqoob Shah, Ex-Auditor-General of Pakistan and Jafar Shah Phulwarvis have presented a view that the riba which is prohibited by the Holy Our'an is that kind of ribs which was prevalent among the Arabs at the time of the revelation of the verses relating to the prohibition of riba, because the word al-riba has been particularized with (alif and lam) and as such will be relatable to the kind of riba which was then prevalent .among the Arabs, and since the commercial loan for productive purposes was not in practice, the interest charged by the Banks for commercial purposes does not come within the ambit of `al-riba', prohibited by the Qur'an as, then, there was no banking system. The argument is not tenable for two reasons.

97. Firstly, for the sake of argument, if it is accepted that the word al-riba, being a proper noun is relatable only to the riba prevalent among the Arabs, the Qur'anic address to "The Believers, may also be contended to be relatable to the people who had by then entered into the fold of Islam or the word al-khamr, which is unlawful will also be restricted in its scope and its application to the kind of liquor used by the Arabs at the time of revelation of the verses prohibiting `khamr' or for that matter `al fahsha' used in the Our'an will also be deemed to be restricted in its application and scope to the forms of immorality which were then prevalent among the Arabs. Such examples can be multiplied, but only an ignorant man will say so.

98. It will be interesting to note that even in English law the word "interest" has a basic meaning of advantage or profit. When used with reference to a loan, interest means the profit or advantage of the creditor which he, gets by giving to another the use of his money. 1f the contract stipulates that fot the use of the creditor's money a certain profit shall be repayable to the creditor that profit is interest, by whatever name it is called, or if it is called by no name at all." (United Bank Ltd. v. Rubber Industry, 1982 CLC 2522).

99. Secondly, it is belying the history that there was no commercial loan for productive purposes during the period of the Holy Prophet. It is, however, admitted by them that there are few instances of agricultural loan. The argument is fallacious. A loan may be obtained for commerce or trade or agriculture or even for that matter industry but it remains a loan for productive purpose which is the ultimate end.

100. It may, therefore, be stated that Riba forbidden in the Qur'an and Sunnah includes interest due on the loans taken or given for commercial and productive purposes by banks or other financial institutions. This is obvious from the fact that at the time of the revelation of the Holy Qur'an, the Arabs used to take/give loans for commercial purposes on fixed rates of interest. Reference may be made to the following traditions:

(i) In pre-Islamic period taking loans on interest for commercial and productive purposes was in practice. Makkah, Taif and Najran were known as famous commercial centres. As there was no agriculture and industry in that period, the Arabs to a large extent had to depend on such loans for maintaining their social life and' for growth in their trade. The capitalists used to give loans on interest to the merchants and entrepreneurs. (See Jawad Ali: Al-Mufassal fi'1 Tarikh al-Arab qabal al-Islam, Beirut, Volume VII, pages 219-227). (ii) The inhabitants of Taif who belonged to Thaqif tribe were famous for running business on interest. It is for this reason that when Holy Prophet made pact with the people of Taif, a condition was laid therein that all the interest bearing business will be totally abolished and all the interest due from either side will also be wiped off. Some people of Taif gave loans to some traders of Makkah on fixed interest. (See Fazal-ur-Rahman Tijarati Sud, Tarikhi owr Fiqhi nuqtai nazar sai, Aligarh, page 10). (iii) When the Holy Qur'an prohibited the due interest in the verse: ("O ye who believe! Fear God, and give up what remains of your demand for usury, if ye are indeed believers" (2:278), a prolific writer, on Qur'an Hadith and fiqh Jalaluddin Suyuti in Al-Durral-Manthur Beirut, Vol. 1, n. 366 explaining the above verse writes: (This verse revealed about Hazrat Abbas and a man from Banu Mughirah who were partners in pre-Islamic period and gave commercial loans on interest to the people of Thaqif belonging to Banu Zamratah i.e. Banu Amar Bin Umair. When they embraced Islam, they had a great amount of interest due on the people. So this verse was revealed and they were ordered to give up the interest due on the people). He further writes in this regard:-- (It has open related on the authority of Ibn al-Juraij about this verse who said that the tribe of Thaqif made a pact with the Holy Prophet wherein they ordained that the will give up all the dues of the people regarding interest as well as that which they had to pay to the people as interest. After the conquest of Makkah, the Prophet appointed Attab Ibn Usaid as Governor of Makkah ana Banu Amr Ibn Auf used to take interest from Banu Mughirah and they provided them loans on interest in pre-Islamic period. When they embraced Islam, they had a great amount of interest due to Banu Mughirah and Banu Amr demanded it from them. But Banu Mughirah refused to pay them the interest and the matter was referred to Attab who wrote to the Holy Prophet about it. On this the above verse was revealed and the Prophet wrote to Attab that they should "give up" the due interest failing which we will be at war against them). He continues to say:- (it has been related on the authority of Dahak who, while explaining the above verse, said that Arabs in pre-Islamic period took/gave loans on interest for commercial purposes. When Islam came they were ordered to take/give their principal only)

101. It is pertinent to mention that Zubair Ibn al-Awwam used to keep the savings of the people as trust so that he may invest them in a productive business and get benefits. It is for this reason that when he died, he had to pay five lacs to the people and left five crore and two lacs of dirhams. (Al-Bukhari, Muhammad Ibn Ismail, Delhi, Vol. I, page 331).

102. In the period of Hazrat Umar, Abu Musa al-Asha'ry, the Governor of Iraq, gave loan to the two sons of Hazrat Umar namely Abdullah and Ubaidullah and they invested that amount in a productive business: (Imam Malik al-Muwatta, Cairo, page 186).

103. Similarly, in the period of Hazrat Umar, Hind Bint Utbah took a loan from Baitul Mal for investment in a trade: (Al-Tabari Ibn Jarir, Cairo, Vo1.III, page 87).

104. Hazrat Umar had taken loan from Baitul Mal on mudarabah and when he was near his death, he instructed his son Abdullah to return the said amount to Baited Mal. (Takmilah Fath al-Mulhim, Karachi, Vol. 1, page 573).

105. Abdur Rahman Ibn Yaqub took a loan from Hazrat Usman for commercial purposes on the basis of mutual profit sharing: (Al-Baihaqi, al-Sunan al-Kubra, Multan, Vol. Vl, page 11).

106. A contemporary Muslim economist, M. Umar Chapra, Financial Adviser to the Government of Saudi Arabia, writes in this regard:-- "On the occasion of his Farewell pilgrimage, the Prophet, while declaring the abolition of interest, announced the remission of interest accumulated in favour of his uncle 'Abbas Ibn Abd Al-Muttalib, this was interest on business loans extended to the Banu Thaqif tribe. This tribe had not taken the loan from 'Abbas and others for fulfilling consumption needs but for expanding their business. This was not an isolated case but a prevalent form of business financing in those days. Several tribe members having skill in trading acted essentially like large partnerships, borrowing finance from members of their own tribe or from other friend tribes, to carry on large-scale business which their own resources would not permit. This is because they could not undertake too many business trips abroad from cast to west. The slow means of communication, the difficult terrain and the harsh climate I confined them to mainly two carvan trips during the year, one in summer and one in winter (al-Qur'an, 106:2). Accordingly they collected all the finance they could muster to purchase the local produce, sell it abroad and bring hack what was necessary to satisfy the entire needs of their society for imports during a specific period: Most of the interest based transactions mentioned in the classical commentaries in relation to the prohibition of riba are loans taken by tribes from each other, each tribe acting like a large partnership company. Islam abolished the interest-based nature of these relationships but reorganised them on a profit-and-loss-sharing basis. `The financier got a just share and the entrepreneur did not get crushed under adverse conditions, one of which was the carvan being waylaid on the journey". (M. Umar Chapra, Towards a Just Monetary System, Wiltshire, pages 63-64).

107. An eminent Muslim Scholar, Shaikh Muhammad Abu Zahra of Egypt writes:

"If the word "Riba" is interpreted as riba prevailing in pre-Islamic period, then there is no argument for the fact that it was only charged on consumptional loans and was not charged on loans for productive and commercial purposes, but what is available for a reader from the authentic history is that it was mostly charged on loans for productive purposes. The circumstances of Arabs, the position of Makkah and the trade of Quraish--all support the preposition that loans taken or given at that time were for productive purposes and not for consumptional purposes only" (Muhammad Abu Zahrah, Buhus fi al-riba, page 52, Beirut Edition).

108. An orientalist, Abraham Udoviteh states that:

"Any assertion that medieval credit was for consumption only and not for production is just untenable with reference to the medieval Near East." (Abraham Udoviteh "Partnership and Profit in Medieval Islam", Precsiceton, page 86).

109. It is pertinent to mention here that the difference between interest on consumptional loans and interest on productive loans is a difference of degree and not of kind since interest is nothing but an addition to the borrowed capital on deferred payment basis.

110. Mr. Fazlur Rahman, Lecturer, Faculty of Sunny Theology, Muslim. University, Aligarh, in his book has undertaken an analytical study on the question of riba. The book, in fact, has two parts. The first part deals with the question as to whether in the pre- Islamic Arabia the commercial interest was prevalent or hot and whether the system of borrowing loan for productive purposes was then existing? In the second part, he has undertaken a juristic study whether commercial interest falls within the definition of riba or not? The book, as a whole, is, in fact, a detailed criticism on the book ;(Commercial Interest ka fiqhi jaiza) published by Idara-e-Thaqafat Islamiya, Lahore. It may be stated that the criticism on the said book of Ja'far Shah Phulwari (which includes an article by Yaqub Shah) was previously published in eight instalments in the well-known Urdu monthly journal, Burhan, Delhi. It seems that the said Articles, later on, were compiled in the form of aforesaid book by Mr. Fazlur Rahman.

111. The learned. author (Mr. Fazlur Rahman) writes under the heading as under:--

112. All the above quotation provided ample evidence that loans on interest or on mudarabah for commercial purposes were in practice among the Arabs at the time of revelation of the Holy Qur an and when the Holy Qur'an prohibited interest, it applied to the interest on commercial loans for productive purposes as well as to the interest on consumptional loans. Encylopaedia of Religion and Ethics (ED) James Hastings, New York, 1954, Articles on Usury (Hebrew) anal Usury (Jewish).

113. In this respect it will be advantageous to quote a well-known Egyptian Alim Abu Zahra (d.1974 A.D.). He writes: (For translation of the above quotation, see para. 107)

114. In this connection Maulana Maudoodi writes id his famous book Sud Lahore, pp. 240-41 :-

115. Maulana Maudoodi further writes about the function of a modern Bank as under :-

116. It is thus obvious that a bank performs the same function as that of the Jews and Arab tribes in pre-Islamic period who got capital on interest from the people and supplied loans on interest to the individuals as well as merchants. It is thus beyond any doubt that Bank interest comes under the category of riba prohibited by the Holy Qur'an and Sunnah of the Holy Prophet (p.b.u.h.) Moreover, the prohibition of interest as laid down in the Holy Qur'an and Sunnah of the Holy Prophet is general in its extent and application irrespective whether it is given or taken by the Bank or any other institution or an individual.

117. It is an accepted principle of interpretation as also recognized in the modern jurisprudence that if a provision of statute makes some exception, only that exception is to be taken into consideration while interpreting the main provision of law. In the case of there being no exception the provision of law will be read absolute in terms and without any exception. It is also a recognized rule of modern jurisprudence that in a provision of law if an exception is made it is to be made by the same authority who is competent to make law who shall so provide in the existing provision of law. In the instant case, the Verses. of the Holy Qur'an prohibiting riba, taken as a whole, and particularly the last ones which declare the interest as prohibited are absolute in term. This prohibition has been clarified by the several Ahadith of the Holy Prophet (p.b.u.h.). If someone claims that the provision of riba is restricted to a particular class of loan or to particular class of institutions that can only be provided by the law maker himself, the Almighty Allah and His Holy Prophet Muhammad (p.b.u.h.). We cannot read into the provisions of the Holy Qur'an and the Sunnah of the Holy Prophet anything while interpreting riba, which is extraneous and repugnant to the very spirit of the provision of law itself.

118. Let us now refer to the answer to question No. 1 given by Dr. S.M. Hasanuz Zaman, Chief of Islamic Banking Division, State Bank of Pakistan, Karachi. He writes as to the definition of Riba: "The inferred meaning (isharat al-nass) of the Qur'anic verse "And if ye repent then ye have your principal" (2:279) is suggestive of the Qur'anic definition of interest. This implies that anything chargeable in addition to principal amount comes m purview of prohibited riba which is the Arabic word for interest."

119. The Holy Prophet was more concerned with plugging the loopholes towards charging interest and eliminating inequities appearing in barter transactions. Thus whatever he disallowed as interest explained the scope of application of Qur'anic interest rather than suggesting any new definition. The well-known narration: (Al-Suyuti Al-Jami al Saghair, Cairo, Vol. 11, p.94, made by Hasan Basri on the authority of Hadrat Ali and understood by some commentators as Hadith has generally been treated to be the standard definition of interest that provides us with a touchstone of determining the nature of a transaction of debt or credit. The definition as inferred from the Qur'anic verse and the direct definition as given in the reported Hadith cover simple increase on loan. The Qur'anic ban on simple interest followed a ban on exorbitant or compound interest in the verse (3:130). This policy is inspired by the mode of prohibition in the Qur'an that warns (2:279). The question if the ban on interest as imposed by the Qur'an and detailed out in the Hadith would be equally applicable in the present day financial transactions would be decided on the basis of the well-known fiq1ti rule which provides that Thus the absolute prohibition as pointed out above would not be relaxed unless it is done so in the Qur'an or by the Holy Prophet himself ....because the rule is that (Al-Mujallah, Article 64)

120. We may, now, refer to, on the question of prohibition of Riba both for consumption and productive loans, the "Report of the Council of Islamic Ideology on the Elimination of Interest from the Economy", Islamabad, 1980, then headed by one of us (Dr. Tamil-ur-Rahman), as a consensus of Pakistani scholars in fiqh, economics and banking (Ijma). The relevant paragraphs read as under:-- 'The Holy Qur'an explicitly and emphatically prohibits riba. There is complete unanimity among all schools of thought in Islam that the term riba stands for interest in all its types and forms. The phraseology of the verses in which people are instructed to shun interest and the severity of the admonition administered to those who do not abide by the divine injunction in this regard leave no doubt in one's mind that the institution of riba is wholly repugnant to the spirit of Islam." (page 7). "The rationale for prohibition of charging of interest on loans taken for consumption purposes is obvious. Such loans are usually taken by people of small means to meet urgent personal requirements as they have hardly any cushion of savings with which to meet such requirements. t'rohibicion of intere:,t in so far as loans of this type are concerned rests mainly on humane consideration. The main rationale for prohibition of interest in the case of loans for production purposes stems from the concept of justice between man and man which is the cornerstone of the Islamic philosophy of social life. Uncertainty is inherent in a business enterprise irrespective of the time and space dimensions. The opening results of the enterprise cannot be foreseen and the occurrence of profit or loss and their magnitudes cannot be fully determined in advance. It is, therefore, a sheer injustice if the party providing money capital is guaranteed a fixed and predetermined return while the party providing enterprise is made to bear the uncertainty all alone. On the other hand, a fixed interest rate can also be unjust to the lender of money in case the entrepreneur using this money earns it profit quite out of proportion to what he pays by way of interest." (Report of the Council of Islamic Ideology on the Elimination of Interest from the Economy, Government of Pakistan, Islamabad. (page 8).

121. The Second Seminar on fiqh, under the auspices of Islamic Fiqh Academy of India was held at New Delhi, during December 8-11, 1989. This Seminar was attended by the `Ulema from all over India, besides two Ulema from Pakistan and Nepal. In this Seminar, an item on the agenda relating to "Commercial interest and Islamic Shari'ah was discussed and after deliberations the following resolution was passed:--

122. Now, it needs to mention that the Islamic Fiqh Academy, constituted in 1983, under the auspices of the Organization of Islamic Countries (OIC) represented by all its member countries in its Second Session held at Jeddah during December 22-28, 1985, which was also attended by one of us (Dr. Tanzil-ur-Rahman) as an expert, on special invitation by the Academy) has declared Bank interest as Riba prohibited in the Holy Our'an. The resolution is reproduced as under:-- RESOLUTION N0.3. CONCERNING

123. The order of modern .banks and the order to adopt Islamic principles therein.

124. The Academy having noticed different discussions on modern Banks and keeping in view their bad effects on the international economic system particularly the countries of third world, and that this system has developed interest which has been expressly banned by the Holy Our'an whether wholly or partially with clear instructions to be given up and to return the principal amount in loans without any increase or decrease whether more or less, and to regard the declaration of war against those who take or give interest; RESOLVES (1) Any excess or profit on a loan for a deferred payment when the borrower is unable to repay it after the fixed period and similarly any excess or profit on a loan at the time of contract, both are riba forbidden in Shari'ah. (2) The alternate banks should be established according to the injunctions of Islam to provide economic facilities. (3) The Academy resolved to request all the Islamic countries to establish banks based on Shari'ah principles to fulfil all the requirements of a Muslim according to his beliefs so that he may not face any repugnancy."

125. After the Holy Our'an and Sunnah of the Holy Prophet (p.b.u.h.) which are the two primary sources of Shari'ah, Al-Ijma' the Consensus, is the third source of Shari'ah, though secondary in nature. By the above-said Resolutions, we have just seen the consensus of the opinions of the jurists, economists and bankers of Pakistan represented through the Reports of the Panel of Experts and the Members of the Council of Islamic Ideology in 1978, which was discussed and finally adopted in its Session of the 15th of June, 1980, with certain additions and alterations by the Council of Islamic Ideology (then headed by one of us (Dr. Tanzil-ur-Rahman). The Council is a Constitutional body set up under Article 228 of the Constitution of Pakistan, 1973 to advise the Government on Islamic matters and whose Reports arc to be, laid annually before the National Assembly under Article 230(4) of the Constitution and laws are to be enacted accordingly.

126. All the jurists, ulema, economists and bankers of Pakistan, who appeared in this Court or sent their written opinions on the subject are unanimous that the Bank's interest comes within the definition of riba and is forbidden by the Holy Qur'an and Sunnah of the Holy Prophet (p.b.u.h.).

127. We have also seen the consensus of the opinions of the `Ulema' of India, as per unanimous Resolution passed at the Second Seminar of the Islamic Fidh Academy of India. Refer quarterly journal' Phulwari Sharif Patna, Vol. II, issue No.8, January March, 1990, pages 12 and 13.

128. And finally we have also seen the consensus of the `Ulema of the entire Muslim 'Ummah' represented through Islamic Fiqh Academy set up under the auspices of the Organization of Islamic Countries, wherein some 43 Member Muslim Countries are represented. They have given their unanimous verdict on the point at issue. Thus, there is an `Ijma' consensus of the Ummah. The question, therefore, stands foreclosed.

129. In view of the above discussion, we are of the firm view that the interest charged on loans and given on deposits by the Banks falls within the definition of Riba and that it makes no difference whether the loan is taken for 'consumptional purpose or for productive purpose, i.e., for trade, commerce and industry.

130. Another point raised by Mr. S.M. Zafar is that the word "Riba" has not been defined either in Qur'an or Hadilh and it would, therefore, fall within the area of Mutashabuhat". The learned counsel seems to be impressed by the last two paragraphs of the paper "Silent Consensus on Permissibility of Bank Interest". The learned writer of the paper, with due respect, is probably unaware of the actual connotation that the word "Mutashabahat" carries. Therefore, it seems necessary to interpret and give the real meaning of the word "Mutashabahat" in the light of the Holy Qur'an and Sunnah. This word has been used in Verse No.7 of Surah Al-Imran (111:7) and it is reproduced as under:-- "He it is Who has sent down To thee the Book; In it are verses Basic or fundamental (Of established meaning); They are the foundation Of the Book; others Are allegorical. But those In whose hearts is perversity follow The part thereof that is allegorical, Seeking discord, and searching For its hidden meanings, But no one knows Its hidden meaning except Allah. And those who are firmly grounded In knowledge say: "We believe In the Book; the whole of it is from our Lord: "and none Will grasp the Message Except men of understanding." 'This verse refers to categorical orders of the Shari'ah (or the law), which are of established meaning, (muhkanr) plain to everyone's understanding which include the very foundation on which the whole edifice of Law rests, as distinguished from the various illustrative allegories .. .. .. .. The commandments and prohibitions (Awamir wa Nawahi) based on nusus (clear texts) of the Holy Qur'an and Sunnah are eternally binding. Such provisions of Holy Qur'a and Sunnah read as together, are self-contained in their very nature. They are to be obeyed and acted upon in all ages and by all Muslims. These nusus of the Holy Qur'an and Sunnah are immutable and in no circumstance arc changeable". (Essays on Islam, by Justice Dr. Tanzil-ur-Rahman, published by Islamic Publications (Pvt.) Ltd., Lahore, pp.389-90).

131. The word "Mutashabahat" as used here is derived from its literal root 'Shibh' which means "resemblance". It refers to the verses of the Holy Qur'an that arc figurative, metaphorical or allegorical as distinguished from verses that arc basic, fundamental and very explicit in their meaning. The Commentators of the Holy Qur'an have elaborately discussed the two categories and have referred to both of them as mentioned in the Holy Qur'an from all angles i.e. purely from linguistic point of view as well as the meanings they stand for. Since the Holy Qur'an is a book of guidance, all its Injunctions relating to the permission or prohibition of certain acts are crystal clear and are considered as verses of the first category i.e. "Muhkamat" while those concerning the Attributes of Allah, the nature of Hell, Heaven etc. are considered as 'Mutashabahat' In other words the verses relating to Ahkam are 'Muhkamat' and they have been made clear in their meaning, with no doubt whatsoever, by the Holy Qur'an and Sunnah of the Holy Prophet (p.b.u.h.) who implemented them at the individual and collective level of the Muslim Ummah as that was the mission assigned to him by Allah. Other verses that mostly relate to the metaphysical or supernatural matters or things beyond the normal perception of the human beings are categorized as 'Mutashabahat'. They have been described in words nearest in sense to human understanding, however, their exact comprehension in the true sense is not possible for human mind in this world.

132. Allama Jalaluddin Suyuti in his well-known book `AI-Itiqan fi Ulum al Qur'an' while discussing the various categories of the Verses of the Qur'an has written a separate chapter on `Muhkam and Mutashabah'. The relevant part of its translation in Urdu published by Noor Muhammad Assah al-Matabi' wa Karkhana Tijarat Kutub Aaram Bagh, Karachi, Vol. II, p.l, is reproduced below:--

133. It seems appropriate to refer here to the commentary on the Verse by Abdullah Yusuf Ali who writes in this connection that:-- "This passage gives us an important clue to the interpretation of the Holy Qur'an. Broadly speaking, it may be divided into two portions, not given separately, but intermingled, viz., (1) the nucleus or foundation of the Book, literally "the mother of the Book, and (2) the part which is figurative, Metaphorical or allegorical. It. is very fascinating to take up the latter, and exercise our ingenuity about its inner meaning, but it refers to such profound spiritual matters that human language is inadequate to it, and though people of wisdom may get some light from it, no one should be dogmatic, as the final meaning is known to God alone. The Commentators usually understand the verses "of established meaning" (muhkam) to refer to the categorical orders of the Shari'at (or the Law), which are plain to everyone's understanding. But perhaps the meaning is wider: the "mother of the Book" must include the very foundation on which all Law rests, the essence of God's Message as distinguished from the various illustrative parables, allegories, and ordinances. If we refer to xi. 1 and xxxix. 23, we shall find that in a sense the whole of the Qur'an has both "establish meaning" and allegorical meaning. The division is not between the verses, but between the meaning to be attached to them. Each verse is but a Sign or Symbol: what it represents is something immediately applicable, and something eternal and independent of time and space; --the "Forms of Ideas" in Plato's Philosophy. The wise man will understand that there is an "essence" and an illustrative clothing given to the essence, throughout the Book. We must try to understand it as best we can, but not waste our energies in disputing about matters beyond our depth". (The Holy Qur'an, Text, Translation and Commentary, published by Shaikh Muhammad Ashraf, Lahore, Vol. 1, page 123). Sayyid Abul A'la Maudoodi writes:- "This implies two important things here: (1) Allah knows your nature better than yourself or anybody else: therefore, there is no other alternative for you but to trust in the Guidance sent down by Him. (2) The Benevolent Allah Who has been providing for all your needs, great and small, throughout all the stages of your life, ever since your mothers conceived you, could not possibly have neglected to provide for your guidance, which is after all the greatest need of your life. "Muhkam" is that which is precise, exact, clear and decisive. Muhkamat are those verses of the Qur'an which have been so couched as to make their meaning quite plain without any shade of ambiguity. They have been purposely so worded as to make their meaning definite and precise leaving little room for misinterpretation. These verses constitute the fundamental principles of the Book. i.e., they and they alone determine the aim and object for which the Qur'an has been sent down. They invite the world to Islam, teach morals and give warnings. They refute wrong beliefs and practices, and lay down the way of right living. They expound the fundamentals of religion and state beliefs and practices, morals and duties, commandments and prohibitions. Therefore a seeker after Truth should turn to these verses as these alone can satisfy his needs. Naturally such a person will concentrate on these verses and endeavour to derive the greatest benefit from them. "Mutashabihat" are those verses in which there is a possibility of more than one meaning. Their object is to give a certain minimum knowledge about the universe, its beginning and end, the position of man therein, and such other basic things, for these things are essential for the formulation of any system of life. It is obvious that no human language possesses words, expressions, idioms etc., to depict clearly those supernatural things, which have never yet been grasped by human senses, nor seen nor heard nor smelt nor touched nor tasted by human beings. That is why such supernatural things have to be described in terms of human life. That is why the Qur'an uses ambiguous verses in human language which are liable to give rise to more than one meaning. Thus it is clear that the main benefit of such verses is that they help one approach the Reality and form a conception of it. Hence the more one tries to determine their precise meanings, the more one gets involved in doubts and ambiguities. As a result of this, one will not be able to find the Reality but will be led further away from it and cause mischief. Therefore those, who seek after the Truth and do not hanker after superfluities, rest content with the simple idea of Reality they get from the ambiguous verses, which suffices them for an understanding of the Qur'an; they concentrate their whole attention on a fuller comprehension of the Verses which are precise in meaning. On the other hand, those who love superfluities or seek after mischief, spend their time and energies in giving arbitrary interpretations to the ambiguous verses." (The Meaning of The Our'an, Pub. Islamic Publication Limited, Lahore, Vol.II, pp.14-15).

134. So far as the definition of riba is concerned, it is not correct to say that riba (interest) prohibited has not been defined in Qur'an and Sunnah and as such it falls within the area of mutashabihat. Actually riba was well-known to Arabs in pre-Islamic period and they charged it on the loans. According to the commentators of the Holy Qur'an the riba in the pre-Islamic period was that when a loan extended by an Arab matured, he would ask the borrower for the return of the principal or for an increase in return for the postponement. If the borrower was unable to repay the principal when the loan matured, he would be allowed an extension in the time of repayment with the continuation of the riba he has been receiving from the borrower According to Imam Fakhruddin Al-Razi the Arabs in pre-Islamic period used to give loans on the condition that every month they will receive a stipulated amount over and above the principal amount. When the time of settlement came, the principal amount lent was demanded and if the debtor was unable to pay, the lender increased the amount in his own favour and granted extension of time. (Tafsir al-Kabir, Volume VII, Teheran edition, page 85).

135. The Holy Prophet said "There is no riba except in the nasiah" (Bukhari, Volume 11, page 138, Beirut edition). Riba al- naia signifies fixing in advance of a positive return on a loan as a reward for time. It is riba al-nasia which has been prohibited in Verse 2:275) (Allah has forbidden interest). There is consensus of opinion among the Ummah that riba al-nasia is rite prohibited in Islam as stated by Ibn Abdul Bar in Al-Tamhid. The jurists have defined riba al-nasia as, (Any lending arrangement that obligates the borrower to pay a certain extra amount over and above the principal amount against the specified deferment. "(Al-Jasas, Abu Bakar, Ahkam al-Quran, Vol. 1, page 557), Beirut edition). Thus riba does not fall in the category of mutashabihat in so far as riba al-nasia is concerned. The opinion of an individual scholar or even a group of scholars in any part of the world shall not affect the consensus of the opinion on this point. Islamic Fiqh Academy, Jeddah which is a representative body of the Muslim world has declared bank interest in all forms and on all accounts as riba prohibited in Islam.

136. It may further be added that as far as the word "Riba" and its definition is concerned it has been explained both by the speech and act of the Holy Prophet himself, without any room for doubt because the Injunction was implemented in the practical life and the element of "Riba" declared unlawful (haram) and was totally abolished from the Islamic economic system once for all and this could only be possible after clarifying its meaning. The Holy Prophet (p.b.u.h.) has said: "Both legal and illegal things are evident but in between them there are doubtful (suspicious) things and most of the people have no knowledge about them. So whoever saves himself from these suspicious things saves his religion and his honour. And whoever indulges in these suspicious things is like a shepherd who grazes (his animals) near the Hima (private pasture) of someone else and at any moment he is liable to get in it. (O people) Beware! Every king has a Hima and Hima of Allah on the earth is His illegal (forbidden) things. Beware! There is a piece of flesh in the body if it becomes good (reformed) the whole body become good but if it gets spoilt the whole body gets spoilt and that-is the heart."

137. As it has been explained in the earlier part of the judgment there are two types of Riba: (1) Riba al-Nasiah and (2) Riba al-Fadal. Presently in these petitions we are concerned with Riba al-Nasiah i.e., the interest charged on the money lent or in other words the addition over and above the principal sum advanced on loan. It includes all kinds of interest irrespective of the fact whether the rate stipulated is high or low and whether the interest is or is not added to the principal sum after fixed periods and whether the sum lent is for production or consumption purposes. So far as this kind of Riba is concerned we have not come across any difference of opinion regarding its prohibition. There is no Commentator of the Holy Qur'an, no narrator of Ahadith, and no Jurist of Islamic Fiqh worth the name who has even expressed or even mentioned any doubt regarding any obscurity or ambiguity in its meaning. The difference of opinion whatever is found is regarding `Riba al-fadal' and that is out of discussion in the context of Bank interest which is under our consideration.

138. Usually it is narrated from Hazrat Umar (R.A.T. ) that he said: "The last of what was revealed was the verse of Riba and the Messenger of Allah expired, he did not elaborate it to us." However, some of the people forget to read further that Hadrat `Umar (r.a.t.u) also added thereafter: "So give up Riba and the doubt" (Musnad Ahmad, Vol. I, p.36) Dr. Muhammad Rawwas Qalaji, in his famous book entitled published by (Darul Nafas p.423) explaining the above writes:- "The word `Reeba' as uttered by Hazrat Umar alongwith "Riba" is derived from original root which means doubt and herein is meant everything that creates doubt in the mind about its permissibility. For this reason Hazrat Umar was extremely cautious in connection with "Riba" and he used to say: We have left 9/10 of the permissible things clue to fear of Riba (Refer to Al-Musannaf Abdur Razzaq, Vol. VIII, p.152). One day he stood up for address and said: The last of the revealed verses is the verse of Riba. The Holy Prophet (p.b.u.h.) expired before he could elaborate it to us. So leave what creates doubt in your minds and do what is absolutely free from doubt." The stand taken by Hazrat Umar, in fact, shows that whatever he said was in respect of Riba al-fadal and not Riba al-Nasiah. The Holy Prophet (p.b.u.h.) had explained `Riba' with regard to some six defined things (in case of Riba al -Fadal) but with regard to other things the explanation about (Abul Fadal) being applicable to them could not be found and that caused slight difference of opinions in-respect of Riba Al-Fadal in certain other things not mentioned specifically. Some of the Fuqaha kept Riba Al-Fadal restricted while others did not confine it to the six commodities but on their analogy extended the same to other things that 'contained certain inherent characteristics of the six commodities mentioned in the hadith. But so far as `Riba al-Nasiah' is concerned, that was made absolutely clear with no difference whatsoever among the Jurists. It does not appeal to sound reason to even presume that on one hand the Holy Qur'an declares war in such emphatic words and says: "Believers"! Be careful of your duty to Allah, relinquish what remains of Riba, if you are true Believers. But if you do it not, then be informed of war from Allah and His Messenger (2:278)'; and on the other hand may leave the matter of Riba undefined and unexplained.

139. In view of the above the only need of the time for all of us is to firmly believe and instead of resorting to various alibis reconsider our position in the light of the latter portion of the same verse reproduced as under:- "And those who are firmly grounded In knowledge say: We believe In the Book; the whole of it Is from our Lord": and none Will grasp the Message Except men of understanding. "Our Lord!" (then say), "Let not our hearts deviate Now after Thou hast guided us, But grant us mercy From Thine own Presence; For Thou art the Grantor Of bounties without measure". (III: 7,8).

140. Now we refer to the concept of Maslaha on the basis of which the Advisory Council of the Ulema of East Jawa is stated to have given its verdict in favour of the permissibility of bank interest, mentioned in the Article titled as "Silent Consensus of the Permissibility of Bank Interest", produced by Mr.

141. Maslaha is an important principle of Islamic Law. The definition given by Al-Khawarazimi of Al-Maslaha is as follows:- (Maslaha) means protection of the objective of Shari'ah which is to ward off the evils from the mankind). (Al-Shawkani : Irshadul Fuhul p.242)

142. Imam Ghazali defines more elaborately the legal principle of (Maslahah. The definition given by him was followed by a number of jurists. In the works on usul that are known to us, Ghazali's influence, particularly with reference to Maslahah is very strong. As Ibn-e-Khaldun noticed that Basri's Al Mu'tamad and Ghazali's Al-Mustasfa remained a major source of influence for later writers on usul, until the appearance of Razi's work al-Mahsul.

143. Ghazali s definition is as follows:

144. In its essential meaning (aslan) it (Maslahah) is an expression for seeking something useful (manfa'ah) or removing something harmful madarrah . But this is not what we mean, because seeking utility and removing harm are the purposes (maqasid) which by the creation is aimed at and the goodness (Salah) of creation consists in realizing their goals (Maqasid). What we mean by maslaha is the preservation of the maqsud (objective) of the law (Shar') which consists of five things: 'preservation of religion, of life, of reason, of descendants and property. What assures the preservation of the five principles (usul) is maslaha and whatever fails to preserve them is mafsada and its removal is maslaha. (Al-Mustasfa, Volume-2, page 286).

145. Maslaha as understood by the above definition is then divided into the following three categories. First, the kind of maslaha which has a textual evidence in favour of its consideration. Second is the kind which is denied by textual manifestation. The third is the kind where there is neither a textual evidence in favour, nor in contradiction. The first category is valid and can be the basis of Qiyas. The second is obviously forbidden. It is the third category which needs further consideration. Accordingly, the element of maslaha contained in the third category is further examined from the view point of its strength (quwwa). From this angle there are three grades of maslaha: darurat, haiat, tahsin or tazin. The preservation of the above-mentioned five principles is covered in the grade of darurat. This is the strongest kind of maslaha. The second grade consists of those masalih and munasabat which are not essential in themselves but-are necessary to realize in general. The third grade is neither of the above but exists only for the refinements of things.

146. Keeping this classification in view only that al-maslaha al-mursala will be accepted which has three qualities: darura, qat'iyya, kulliyya. Ghazali illustrates the point with an example.

147. If unbelievers shield themselves with a group of Muslim captives, to attack this shield means killing innocent Muslims a case which is not supported by textual evidence. If Muslims' attack is withheld, the unbelievers advance and conquer the territory of Islam. In this case it is permissible to argue that if even Muslims do not attack, the lives of the Muslim captives are not safe. The unbelievers, once they conquer the territory, will root out all Muslims. If such is the case, then it is necessary to save the whole of Muslim community rather than to save a part of it. This would be the reasoning which is acceptable, as it refers to the above three qualifications. It is daruri because it consists of preserving one of the five principles; i.e. protection of life. It is qat'i because it is definitely known that this way the lives of the Muslim community will be saved. It is kulli, because it takes into consideration the whole of the community, not a part of it. (Muhammad Khalid Masud: Islamic Legal Philosophy, page 153).

148. Muhammad Sa'id Ramdan Al-Buti presented his doctoral dissertation, Dawabital-maslaha fil-Shari'at al-Islamia, at Azhar University in 1965. He discussed the subject of Maslaha at' length and established the fact with valuable arguments that Maslaha in Islamic Shari'ah does not mean only utility and pleasure of this world without restrictions and qualifications. He writes that: It is an established fact that Maslaha acknowledged and accepted by the Islamic Law is that which should be in total conformity with the fundamental principles and basic concepts of Islami Shari'ah . (Al-Buti: Dawabit-al-Maslaha, page 121).

149. The most important principle of Islamic Shari'ah which is always to be kept in mind is that the concept of Maslaha (Weal) is regulated, limited and clarified in such a way that nothing remained obscure or unclear in the concept of Maslaha. Man is created only for the obedience of Allah and his all actions in this life are regulated and streamlined by the revealed law, so as nothing remained beyond the Holy guidance of Allah and His Prophet (p.b.u.h.). As the Islamic Shari'ah has laid down detailed guiding principles for all worldly actions of a Believer, it is also established, regulated, limited and clarified in all the four corners of the concept of Maslaha, and did not leave the concept on the speculations, worldly interest and whims of someone. (Dawabit-al-Maslaha, pages 14-15).

150. We can say in the light of principle of Islamic Shari'ah that Maslaha has three most pertinent characteristics, which are as under:- (i) The concept of Maslaha is not merely related to this world. It must cover the life of mankind, the weal of this world an"' the weal of life Hereafter because the life of man is well connected with the life Hereafter. The life of this world has very strong relation to the life Hereafter which is a cause and effect relation. The happiness and success of man is not merely the worldly success and happiness. On the other hand, Islam considers such people successful who would be declared successful in the life Hereafter. For this reason the life of this world is only a means to obtain the success and happiness of the life Hereafter. As the Holy Qur'an says: "But seek, with the (wealth) which Allah has bestowed on thee for the Home of the Hereafter. (28:77). In the face of the above discussion it will not be considered proper for any scholar to interpret the concept of Maslaha, keeping in view merely the problems and affairs of this life. (Dawabit-al-Maslaha, pages 45-48). (ii) Maslaha in the light of Islam is not based on the utility and pleasure of this life alone (Ibid, page 54). (iii) The requirements and the weal of the religion of Islam is on the fore front of everything. Thus the Injunctions of Islam as laid down in the Holy Qur'an and Sunnah of the Holy Prophet (p.b.u.h,) should be protected first and nothing contrary to the said Injunctions of Islam could in any way be considered Maslaha acceptable to Islam.

151. Further discussing the subject, Al-Buti said that there are four (4) controlling factors to control Maslaha so that this should remain within the parameter of Islamic Shari'ah, viz: (i) The Maslaha should be in complete conformity with basic principles of Islamic Shari'ah and help to provide facilities for man so that he may become an obedient servant of Allah in his all actions of life: (ii) Maslaha should naturally be in accordance with the Injunctions of Islam as laid down in the Holy Qur'an and Sunnah of the 14oly Prophet (p.b.u.h.). There was a consensus of opinion among the companions of the Holy Prophet (p.b.u.h.) that Maslaha repugnant to the Holy Qur'an and Sunnah of the Holy Prophet (p.b.u.h.) is liable to be repulsed. (iii) Maslaha should not be in contradiction with some correct analogy. (iv) It must not damage some other greater and more effective Maslaha.(Dawabit-al-Maslah, pp. 18-252). Thus, the rule of Maslaha or Ijtihad is applicable only when there is no direct text of the Holy Qur'an or Sunnah of the Holy Prophet in a matter. We have just witnessed that there are several Verses of the Holy Qur'an and Ahadith of the Holy Prophet which throw sufficient light on the definition of interest and its other aspects and the Ummah is unanimous on the definition and prohibition of riba al-nasia.

152. In view of the above discussion the rule of Maslaha can't be invoked in aid to permissibility of "Bank Interest".

153. For consideration of the other point, whether an increase to offset the depreciation in the value of currency can be justified and considered as an alternate and substitute for interest, in the eye of Shari'ah, we may quote first from the well-known works on Economics as to the theory of inflation and indexation, purely from economic point of view, and then we would examine the same on the anvil of the Qur'an and Sunnah. 154. "Inflation is a persistent tendency for the prices of most pf the goods and services of rise over time. Inflation has been a world-vide problem throughout, much of the 20th century. Nonetheless, inflation has proved to be extremely difficult for economists to define or to distinguish from related problems.

155. It is often hard to determine whether a rise in the price of one product is part of an inflationary trend in the economy as a whole or simply reflects consumer's willingness, at some point, to spend more of their incomes on that particular product". (Collier's Encyclopaedia, Vol. 13, p.7 USA). 156. "By inflation, in ordinary language, is meant a process of rising prices. A situation is described as inflationary when either the prices or the supply of money are rising, because both will rise together ..It can be said that when money supply increases it results partly in the increase of output (GNP) and it partly feeds the rise in prices. And when the supply of output lags far behind, the rise in prices is described as inflationary. In Coulborn's words, it is a case of too much money-chasing to a few goods; thus, inflation is generally associated with an abnormal increase in the quantity of money resulting in abnormal rise in prices "(K.K.D. Modern Economic Theory, Lahore, P.435).

157. J.L. Hanson describing the term of inflation says that "there are three senses in which this term is used: (1) Inflation on the Gold Standard, where a moderate and controlled expansion of bank credit is encouraged by the Central bank whenever there is an inflow of gold, the extent of an inflation in such circumstances is rigidly controlled since it is dependent on the amount of gold the country concerned has acquired. (2) Persistent (or Crewing) Inflation, is a condition where the volume of purchasing power is persistently running ahead of the output of goods and services available to consumers and producers; with the result that there is a persistent tendency for prices and wages to rise, that is for the value of money to fall .Since 1939 all countries have experienced varying degrees of persistent inflation. (3) Hyper-inflation, (alternatively known as a galloping' or `runaway' inflation) occurs when a persistent inflation gets out of control and the value of money declines rapidly to a tiny fraction of its former value and eventually to almost nothing, so that a new currency unit has to be adopted". (J.L. Hanson: A Dictionary of Economics and Commerce, 5th Ed., London p.262).

158. Inflation is a very complex phenomenon. There is no sovereign remedy to combat it. Measures have to be taken on several fronts, monetary and non-monetary, to flight. An effective supplementary device for controlling inflation is what has been called 'indexation'.

159. J.L. Hansom defines 'indexation' as follows: "A system of relating income, especially from investment, to the retail price index in a time of inflation in order to offset the fall in the value of money." (Ibid, p.255). 160. "Economic variables are indexed to maintain the real value of variables which are measured in money units. The technique is to link a variable with a selected index e.g. wages may be linked to retail price index. The object is to prevent the erosion of real wages irrespective of changes in the price level. Similarly, the rate of interest can be indexed so that positive rate of return on money can be protected in real terms. Tax system constitutes an important area of indexation so that the proportion of deducted earnings can be kept relatively constant over time". (K.K. Dewett: Modern Economic Theory, ed. 83, Karachi, p.448).

161. Economists have considerably elaborated the merits and demerits of indexation and it clearly appears from the study of the relevant material that the demerits of the theory surpass greatly than that of its merits. Anyhow, indexation has not been considered a cure for inflation, rather it tends to perpetuate and accelerate inflation and to be self-defeating.

162. Indexation may be feasible in respect of wages, salaries and pensions to a mild extent as a temporary sedative for the pain of inflation. But "it is difficult to see how a just case could be built for the indexation of financial assets. Since investors (who not only save but also take the risk of investment) are not assured of a stable real value of their investments, why should savers and cash holders be' so assured when they don't even take the risk. Instead of introducing inequities through indexation it would be just to ask the holders of cash to seek protection through investment. Indexation would tend to induce savers to shy away from risk capital which has been emphasized in the Islamic value system and which is necessary for a growing economy. It would hence be desirable to induce savers to offset any erosion in the real value of their savings through investment". (M. Umar Chapra, Towards a Just Monetary System, Leicester Edition, p.40).

163. We have heard a number of Economists and Bankers in answer to the Questionnaire, reproduced earlier, issued by this Court. Each one of them opposed in clear terms, though briefly, the proposition of indexation based on inflation to be adopted as substitute or alternate to the institution of "Interest". Dr. S.M. Hasanuz Zaman, Chief of the Islamic Banking Division of the State Bank of Pakistan whom we also heard on the Questionnaire, made a request at the conclusion of his submission on the Questionnaire that he may be given one full day to speak on indexation based on inflation as a compensation payable by the borrower to the lender/Bank for the use of loan, borrowed by him, to be adopted as a substitute or alternate to the "Interest", as he has been doing intensive research on the subject for about five years. We, therefore, specially invited him to Islamabad and heard him one full dray. His mastery over the subject and his learned exposition was excellent and was of immense help to us. We would, therefore, like to reproduce, from the learned paper, which he sent to us, later on, on, our request wherein he has summarised the said discussion on the subject which is not only new but important as well. In his own words. 164. "About twenty-one countries of world have introduced indexation but the coverage of indexation is not similar in different countries. A large number of countries have indexed wages, pensions and social security payments. Some other countries have indexed a single bond while many countries have indexed different forms of investments. Brazil is the only country to adopt this practice comprehensively. It is because of these differences that the technique of indexation and the choice of index differ in different countries. The most common technique of indexation is linking wage or investment to consumer prices or cost of living. Some countries make advance adjustments with prices while most countries practice ex post facto adjustments. The period of adjustment ranges from one month to one year; in some cases even three years."

165. The merits attributed to indexation are generally theoretical. As against it the contestants of this approach have based their arguments partly on theory and largely on the basis of experience gained in different countries of the world.

166. In ultimate analysis indexation would mean that some one has to compensate the sufferer for the damage caused to the purchasing power of money or for decrease in its-value. It may be payable by the Government, the employer, the borrower or the banker. In order to examine if the Sharia justifies such a payment by any of these parties we shall have to apply the Islamic law of compensation to these transactions after we have determined the person or the institution responsible for inflation.

167. In the Sharia return on physical human contribution and on financial contribution is governed by two different sets of rules. The former is assigned a fixed remuneration. The government may, if necessary, fix a minimum rate of remuneration and leave the maximum to market forces. On the other hand financial contribution in the form of a loan or a debt is to be rewarded exactly in the same kind and quantity; and excess over and above the sum lent would become interest and is treated to be strictly prohibited. This fact is borne out in the Qur'an, the Holy Prophet's tradition and the detailed discussion by all the fuqaha of all the schools of thought without any exception.

168. The Muslim jurists are so particular about this Quranic prohibition that they have disapproved this practice in all these transactions where deferred transfer of commodity or money is involved. Thus the purview of this prohibition covers not only loans and debts but also credit, barter, deferred exchange of currency, demonetization, delayed-payment of remuneration after devaluation or revaluation, indemnity and change in the unit of currency at the time of redemption of loan.

169. Guided by the hadith the have opined that in case dirhams or dinars are lent out by counting, they will be paid back by counting not by weight. Similarly in case these are lent out by weight they will be returned by weight not by counting. In respect of the loan of a commodity it is further provided by the fuqaha that it should be returned in the same kind and quantity irrespective of any change in its price at the time of return of the loan.

170. In case the amount of loan is in terms of fulus or smaller pieces of dirhams which the Government has banned and which has become out of currency the creditor will take its price. He will not be bound to accept this coin ....because the defect has occurred when the coin was in the borrower's possession The price of the fulus will be fixed as current on the date of borrowing and the creditor will take it irrespective of the degree of defect in its value. But in case the coin, in spite of demonetization, is still in currency and popular, the creditor shall accept the lm. This approach is based on a general principle that in the case of loan of fugible goods the creditor will be paid the same quantity of identical goods irrespective of whether the value of such goods increases, decreases, or remains unchanged during the period of loan. The same approach has been made by them in the case of payment of outstanding wage remuneration.

171. Another situation that causes liability is unlawful occupation of somebody's property (ghasb, usurpation). The usurper (ghasib) is called upon to return the goods or, in the case of destruction of goods, its price whenever the Court orders him to do so. The usurper will not be required to indemnify the loss caused to the value of the property as a result of a fall in its price.

172. The approach to lineage as made by our fuqaha is very clear and consistent. The same consistency exists in case liability of deferred payment arises not as a result of a transaction of loan but even when it arises as a result of barter, demonetization, debasement, devaluation or revaluation, remuneration and compensation and indemnity. In all these situations a loan is to be returned in the same unit of currency and the same amount, irrespective of any change in its relative value in terms of other goods or currency. Any violation of this principle would be a violation of the Quranic prohibition of riba and of the 'Holy Prophet's injunctions. The fuqaha are so rigid in this principle that they do not relax it even in the case of redemption of the liability of dower to a wife. According to Alamgiri the amount fixed for dower will be payable to wife without any regard to increase or decrease in the value of currency on the date of payment.

173. Another objectionable point from the Shari'i angle is the element of ignorance and uncertainty that is observable in indexation. In the Sharia one of the conditions of a contract of deferred payment is precisely determining the liability at the time of making contract. Ignorance from this liability makes the contract void. In indexation the liability is known on the date it is due. In order to solve the problem of time lag between the period for which a change in the price level is observable and the period in which the price level adjustment is applied to the transaction, some countries have accommodated projected inflation also in the index. While ex post indexation involves an element of ignorance (jahl), projected inflation involves the element of uncertainty (gharar) too that makes a contract null and void.

174. While the principle of linking loans and debts to purchasing power cannot be justified on textual grounds there may yet be some arguments to adduce for indexation on rational and logical plane. We may examine these arguments in the following lines:- (1) The phenomenon of worldwide inflation causing hazards in economic life of man was never experienced before. It is, therefore, necessary to do ijtihad and not stick to the opinions of the early fuqaha. The answer to this argument is that the rule is that ijtihad is done only where textual argument, nass does not exist. And because this problem is guided by a nass ijtihad is invalid. (2) The Holy Prophet has said that no damage should be done nor any should be borne. Inflation is a damage to the purchasing power of money. Indexation is a redress against this damage. In order to answer this question we shall have to examine the applicability of the Islamic law of indemnity in context of indexation. The law provides that a person responsible for inflicting a damage should indemnify the sufferer. The question will arise as to who of a multitude of factors responsible for inflation will be made to indemnify the sufferer. In case trade unions are responsible for a cost-push inflation how a bank can be justified in making the entrepreneur indemnify the fall in value of its loan 'money? Will it not be a double punishment to the entrepreneur through paying higher wages to the labour and higher cost of loan to the bank? Why a borrower should be made to pay for a fall in value of money that occurs due to demand-pull inflation caused by receivers of foreign remittances or the recipients of high salaries and those charging fabulous profits. In some countries indexation is limited to Government bonds. It means the Government indemnifies only the bond-holders. The question would arise as to on whose expense bond-holders are being indemnified. Public treasury is mostly financed by public taxes. In other words it is the entire society which is indemnifying the bond-holder only, although every body in the society is equally the sufferer. (3) It can be advocated that the Government being guardian of the interest of the people (wali al'am) may indemnify the people of their loss in the purchasing power of money whether or not it is responsible for it. In this respect the guiding principle is that a damage is to be redressed. The answer to this plea is that the rule is applied only when one is sure that a damage will not be replaced by a bigger damage or a similar damage. Another condition is that mild damage will be endured to get rid of a serious damage. The third condition is that a particular damage may be tolerated to redress a general damage. Contrary to it indexation according to observers is a mechanism which is very much complicated to devise and operate and is a recipe for built-in inflation. The question will arise if we would like to resort to a more complicated mechanism in place of a simple routine without expecting any check on inflation. There is no doubt that monetary expansion brought about by rising public expenditure through deficit financing is treated to be a policy that causes inflation even if no other factors responsible for this situation are combined. But the question will arise why the Government resorts to money expansion. The answer is that the Government does so for overall development of the community, the whole country and the posterity. Confining the Government expenditure to regular budget and neglecting the major development programmes involving huge expenditure can save the people from the hardships of inflation. But at which cost? In the present day world, at the cost of economic and political survival. This means protection from a minor damage at the cost of a- serious damage to the community. Moreover, development programmes and defence preparations may be withdrawn in favour of the purchasing power of the present generation but this may be done only at the expense of the existence of freedom and of the economic prosperity of the posterity. Thus a particular damage will be avoided by exposing the country to a general damage. (4) Another argument that may be adduced in support of indexation is that during inflation trade unions succeed in increasing their wages. It such increase is permissible in the Sharia on the ground of increase in prices how indexation, can be treated to be unjustifiable. It is a fallacious analogy because in the Sharia return on service is governed by a different rule than loan. Any increase in return on service is increase in remuneration while increase in the amount of loan is interest. The former is permissible; the latter prohibited.

175. The following further points discard the idea of indexation on rational grounds. He states:- (a) Value of money is a relative term. It does not represent the intrinsic characteristics of money which are its being a medium of exchange and a unit of account. During inflation it is the relative characteristic-- future value in terms of exchange -- that is affected. This latter characteristic has never remained constant since the day money introduced. This has been so even when full-bodied money was currency. Now the question is : Has any weakness crept within mo: itself that has reduced its purchasing power? Or there is something wrong with the seller of the commodity who is claiming more money for the same commodity. It is surely the latter factor that is responsible for increase in price because supply of goods and services is not matching the existing quantity of money. The intrinsic characteristics of money are intact. The fact that the rate of increase of prices is not generally identical is also a proof to suggest that the defect does not lie in money; it is the difference in demand for or supply of different goods and services that causes this distortion. (b) The basic idea behind indexation is indemnifying the owner/creditor for the loss incurred in future purchasing power of money. And this future is not the moment when. a loan is redeemed; it begins from this moment; Thus it is not only the purchasing power of money that should be guaranteed but also the prospective potential of money that should be ensured. And this is an impossible condition to follow. This means that indexation alone will never fulfil the standard of justice. (c)Another aspect of this injustice is the choice of index itself which represents the basket of consumer goods and their weights that are included in price index. This index presents the consumption habit of an `average person', which does not represent the overwhelming majority of actual persons. This will be unjust for many and a unjustifiable favour for others. Moreover the basket will either represent the expenditure in the whole country/region or a fresh basket will have to be devised for each locality representing a different mode of living, price structure, substitutions, traditions, habits and such other factors. Another distinction will have to be made classwise. (d) Apart from this spatial injustice the index also involves temporal injustice. Index can be made on the basis of prices on some particular date or on the basis of average prices during a particular period once, twice, thrice or four times a year. Unlike it savings, lendings and redemptions are an every day business. Thus average prices will never be precisely factual and fair. (e) Another aspect of injustice of the index lies in its macro-approach. It can be accepted that the loss in purchasing power of money should be made up. But the question is for whom? It is the savers individually, not collectively, whose purchasing power is to be made up. The question then arises: Is the loss in purchasing power of all the individual savers according to the consumer basket which is the index? It will be found that nobody saves for the purchase of index basket and linking anybody's savings to any sort of basket will be unrealistic and unjust. If the loss in purchasing is really to be compensated it should be done according to loss suffered by individual saver. And this is impossible. Compensating the "loss in purchasing power of money is a micro-economic phenomenon. Dealing with it on macro-level will always be unjust. (f) In addition to all these injustices the point is that it is not the act of lending that erodes purchasing power of money; it is the act of saving that is responsible for decline in its value whether or not it is advanced as a loan. As such compensation for this loss from the borrower is unjust. (g) Stability in prices is an ideal. It can be achieved and maintained in a primitive, stationary society for a very long period but in a dynamic society for a very short period. Stable prices in the face of fast changing habits, modes of production, consumption patterns, standards of living, inventions and defence technology is an inaccessible ideal. (h) While arguing for indexation the entire discussion seems to assume a permanent inflationary situation in the future. Wisdom demands for also assuming the fate of indexation in a reverse situation. If indexation is applied during high rate of deflation or during recession also, the ruin that its psychological reaction will bring about can be easily visualized. (i) Indexation is prescribed by some economists to remedy the two failings of money viz. a store of value and a standard of deferred payment which appear due to inflation. But the interesting point is that by this remedy money loses one more characteristic viz. a measure of value, without restoring the lost characteristics. (j) There is also an argument which rejects the odium that has been attached with inflation. According to this approach the protest against inflation is by and large a psychological reaction because the rate of increase in savings of the people is not commensurate with the rate of increase in incomes, due to simultaneous increase in the rate of expenditure on ever increasing consumer items. The opinion rejects overemphasis on the need for maintaining price stability at all costs which in the Sharia is not an end' itself but is intended to achieve some other object. The opinion relies upon Schultze's sectoral demand shift theory therefrom concluding that price stability in developing countries is a far cry. (k) As most of the interest-free loans are non-productive, compensation will be unjustifiable from borrowers' point of view. (1) In case the rate of inflation is higher than the rate of profits, it will discourage the banks to accept loan accounts and to advance funds on equity basis. (m) Indexation by banks would have serious repurcussions on voluntary private lending in the Islamic society. If individuals also are tempted to adopt this scheme, it will open the floodgates to interest. (n) It is also claimed that indexation would bring about confusion in the entire currency system by attributing different values to the same money according to its repository. Thus the same money in imprest, in bank, and in business will bear three different values. During inflation value of money in imprest will continue to fall; value of money in business will depend on its productivity and the value of money in bank which is advanced as indexed loan will remain constant. This will take away the basic characteristic of money which makes it a unit of account. (o) In indexation the index-basket as presently known and practised determines the standard of settlement of money debts in the future. In Islamic law it is mal that can be lent and borrowed and that is the standard of deferred payment. It is the quantity of this mal that is contracted to be returned. Mal has a value and has a want. Basket of commodities is an accounting concept. It has no value because it has no want and is not demanded, nor supplied. Thus it is doubtful if determining this basket as a standard of value in future payments would be acceptable in Islamic law.

176. There is no doubt that if inflation is allowed to grow beyond a reasonable limit, this may dry up investment in public utilities; encourage hoarding and speculation by discouraging interest in socially desirable channels. It may lead to flight of domestic capital. It may cause a decline in the overall real income in the economy. It may adversely affect the distribution of real incomes in different groups of the society mainly to the detriment of the fixed income groups. All these factors create a situation that is not desirable in Islam. There should be a means of redressing these evils and indexation is claimed to be one such technique. But an evil, as already discussed above, should not be redressed by a similar or a bigger evil. Muslim economists should try to explore the ways of fighting inflation within the sanctions provided by the Sharia. If Chile, for example, can succeed in devising a non -monetarist formula for fighting inflation there is no reason why our economists should insist on a device that apart from violating the rules of the Sharia, has failed to cure the evils of inflation, Dr. Zaman concludes.

177. The arguments given in support of indexation are mostly based on some economic principles and do not relate to Shari'ah,

178. A clear and distinct principle has been laid down by the Sunnah of the Holy Prophet: (The benefit derived from any loan is one of different aspects of riba). (Bayhaqi: Sunan-al-Kubra. Vol. V, p. 350).

179. There are several Ahadith which show that any advantage drawn) through loan is not permissible:-- It is narrated from Anas Bin Malik that the Holy Prophet said that when one of you grants a loan and the borrower offers him a dish, he should not accept it; and if the borrower offers a ride on an animal, he should not ride, unless the two of them have been previously accustomed to exchanging such favours mutually. (Bayhaqi: Sunan-al-Kubra, Vo1.V, p.350).

180. Imam Malik says that there is complete agreement among the Muslim jurists (and economists) regarding the prohibition of all credit transactions, where someone gives a loan to another person for a fixed period but the borrower repays (or promises to repay) the sum due before the specified date when the creditor reduces the time of loan due; or when the creditor, increase the time of repayment after the expiry of the period of loan and the debtor (promises) to increase the amount of his debt by a fixed additional sum According to Imam Malik, it is pure interest and there is no doubt about it (Al-Muatta: Imam Malik (Ch. Buy'). Beirut, Vol. 2, p.672. Also see Afzalur Rahman: Economic Doctrines of Islam, Vol. 11, p.73 Lahore).

181. The Muslim jurists have been of the view that if the currency became depreciated at the time of the repayment of loan the borrower will have to repay the same number (quantity), of coin, and he will not be liable to pay anything more. Imam Malik says: (Whatever thing you give to person on the condition that it will be returned to you after a fixed time, and the borrower returns it to you alongwith some addition, it will be riba. (AI-Mudwawanah al-Kubrah Vol. 4, p. 25). Ibn Abidin says: (If some one borrowed some coins, the value of which became depreciated at the time of its payment, he will pay the same). (Ibn Abidin: Tanbeeh-al-Ruqood, Vol. 2, p. 62). He further stated that: (The jurists are unanimous on the point that (in case of loan) if the value of the coins, without its being stagmant, increased or decreased, the borrower have to pay the same number which he borrowed). (ibid). Ubadah Ibn Samit reported that the Holy Prophet (s.a.w.s.) said: (Gold for gold, silver for silver, wheat for wheat, barley for barley, dates for dates and salt for salt--like for like, equal for equal and hand-to-hand; if the commodities differ, then you may sell as you wish, provided that the exchange is hand-to-hand. (Sahih Muslim: Beirut Baba-al-Sarfe wa bay dhabi bil warqi nagdan:

182. Gold and silver (currency) have been counted among the six commodities about which it has been ordained that the transactions among these commodities must be like for like, equal for equal and hand to hand, if someone borrows Rs.100 from the bank which have to be paid back after one year, and this amount after indexation becomes Rs.120 or so, it would fall into the category of Riba, as enunciated in the aforesaid Hadith and comes within the ambit of Riba-al-Nasia'h, as well as Riba-al-Fadl.

183. In fact, currency transactions, in Shariah, are not treated differently from commodity transactions in so far as lending and borrowing are concerned. As such no allowance can be made for the change in the value of the money. (Ziaud Din Ahmad: Money and Banking in Islam, Islamabad, p.184).

184. Referring to the abovementioned Hadith, Umar Chapra, Economic Adviser to Saudi Arabia, has observed that: The rationale for the objection is that if gold (or any other commodity) is used as a denominator, then the lender can reclaim the loan only in terms of the same denominator irrespective of whether its price rises or falls. The lender cannot be given the right to use money or the specified commodity as a denominator at his own option if he does not wish to indulge in Riba-al-Fadl. (Towards a Just Monetary System, p.41).

185. Supporting the arguments of M. Umar Chapra, Dr. Najatullah Siddiqui stated that Chapra has rightly argued that indexation is no cure for inflation. It may even accelerate it. Besides that: `even though it is proposed with the innocent objective of doing justice to the ribs-free lender, it has the potential of doing gross injustice to the borrower. As Kahf observes, `the attempt to compensate one party for erosion in the-value of money is unfair and unjust, and it will be redundant if every body were to be compensated for the sake of justice.' (Manner Khaf in his discussion on Chapra's paper. Proceedings of the Makka Seminar, 1987). According to him indexation would also violate the Islamic prohibition of Riba 'I Fadl. Zubair also finds indexation to be against Islamic principles and without any basis in Shari'ah.

186. We will soon revert, with some more details, to the proceedings of the Seminar held at Jeddah on the question of "Indexation and its application in the Islamic Economy". Refer to para. 227 infra.

187. As far as the loan transactions in commodities are concerned, Abdul Rahman AI-Jaziri writes:

188. Allama Kasani elaborating the point says that if someone borrowed loan on the condition that he will repay some benefit over and above the loan or some one borrowed depreciated coins on the condition that he will repay the correct ones, the transaction will not be considered as legal. The relevant text of AI-Kasani is as under:-- (As far as loan is concerned it is pertinent to mention here that it should not consist upon any kind of benefit, if it be so it will not be legal, for example, if someone gave stagnant coins as a loan on the condition that the borrower will pay correct coins or give anything of benefit at the time of the payment of loan. This kind of transaction will not be considered as lea] because the Holy Prophet (p.b.u.h.) prohibited such kind of loan which brings nay kind of benefit. The principle in this is that any stipulated benefit in the transaction is Riba, for the reason that this benefit is not in compensation of any thing. It is obligatory on every Muslim to prevent himself from actual Riba and the doubt of Riba).

189. Zaila'i also discussed the subject and elaborated the point that if a person borrows some coins or currency as loan and on the time of repayment these coins become stagnant and the currency becomes devaluated, he will be liable to pay the same according to the opinion of Imam Abu Hanifa, and according to the Abu Yousaf he will be liable to pay the value of the time of borrowing. He says:-- (In case loan coins become stagnant these will be returned as they were borrowed according to Imam Abu Hanifa, while Imam Abu Yousaf and Imam Muhammad arc of the opinion that the price of these coins will be returned back. Their argument is that the coins do not maintain their value and borrower is obliged to repay the same value. Imam Abu Yousuf is of the opinion that the coins to be returned will be of the value of the time of borrowing, while Imam Muhammad is of the opinion that these coins will be of the value when they become stagnant).

190. Shamsul Aimmah Imam Sharnsuddin Al-Sarakhsi says~-- (The borrower is liable to pay only the same coins). . Al-Sarkhsi further says that similarity must be observed in transaction of loan. He says:

(Under loan transaction that the same amount should be returned without any increase or decrease).

191. Imam Ibn Oudama al-Maqdisi has also discussed the question elaborately and stated that the borrower should return the same as he borrowed whether there may be an increase in the value or there may be devaluation. (The borrower should pay the same coins or currency irrespective of any increase or decrease occurred in the currency).

192. There is no difference of opinion among the jurists that any increase stipulated to be paid on the amount originally lent out is riba (interest) and is prohibited. The jurists have also applied this principle in case of loan taken in dirhams and dinars. In this connection Ibn Oudamah writes: If dirhams are lent out by counting, they will be paid back by counting and not (by weight. Similarly in case they are lent out by weight they will be-returned by weight and not by counting. (lbn Oudamah, Al-Mughni, Beirut, Lahore, Vol. IV, pages 356-357).

193. The jurists further concur that currency transactions arc treated like commodity transactions in matter of lending and borrowing and, that is, the same quantity should be returned as was borrowed even though the value of the currency may have changed at the time of the return. In this connection a famous Hanafi jurist, Allama lbn Abdin, writes: (There is consensus among the jurists that in case of loan taken in currency (Floos) which has not been demonetized but either it has evaluated or devaluated, the borrower will pay the same quantity (in number) as he has borrowed." (Ibn Abidin, Rasail, Lahore, Vol. Il, page 62).

194. The same approach has been extended by the jurists in case of payment of outstanding wages or remuneration. In this connection it is stated in Fatawa Alamgiri that the worker will be paid his contracted amount of remuneration even though the value of this money has changed before he is paid his due.

195. The jurists are so strict in this matter that they do not relax this principle even in the case of redemption of the liability of dower to a wife. The amount fixed for dower will be payable to wife without any regard to increase, or decrease in the value of currency on the date of payment: (Fatawa Alamgiri, Vol. II, p.205).

196. The jurists have further applied this principle in the case of usurpation. The same amount and kind of money as usurped will be payable to the owner without any consideration to its value at the time of payment. The usurper will not be required to indemnify the loss caused to the value of the property "or' money as a result of a fall in its price: (Ibn Qudama Al-Mughni, Riadh, Vol. V, pp. 288-289).

197. Moreover, it seems unjust and exploitative for a lender to insist on getting a compensation for the erosion in the value of money post facto, while he is not prepared to accept a lower-amount in case the value of money appreciates. It poses a. question: why should a lender be protected against inflation while the borrower is not similarly protected against deflation?

198. Indexation is done due to inflation and inflation is caused either by Government, or by the society itself, or by consumer, or by natural constraints or by trade unions or traders or by international factors. In a large number of cases all the factors taken together are responsible. In case trade unions are responsible for a cost-push inflation how a bank can be justified in making the entrepreneur indemnify the fall in value of its loan money? Will it not be a double punishment to the entrepreneur through paying higher wages to the labour and higher cost of loan to the bank? In the same way, why a borrower should be made responsible to pay for a fall in value of money that occurs due to demand-pull inflation?

199. According to Islamic Law a person responsible for inflicting a damage should indemnify the sufferer and no other person will be held responsible for that. The Holy Qur'an says: (Every soul draws the need of its acts on none but itself: no bearer of burdens can bear the burden of another." (6:164). ?.00. The Council of Islamic Ideology in 1980 has also considered the issue of indexation in its Report on the Elimination of Interest from the Economy. The observation of the Council at p.12' is as follows:-- "Under the Shari'ah, currency transactions are not treated differently from commodity transactions in so far as lending and borrowing are concerned. The basic principle is that the same quantity (units) should be returned as was borrowed even though the price of the commodity may have changed in the meantime. For example, if one maund of wheat has been borrowed, the borrower will have to return one maund of wheat even though the price of one maund wheat may have risen from Rs.30 to Rs.50 per maund or fallen to Rs.15. Similarly, if the borrowing consisted of a specified amount of money, say Rs.1,000 the borrower will have to repay the same amount of money even if the value of rupee in terms of other goods and services may have changed during the period."

201. Mawlana Muhammad Taqi Usmani, in his paper presented at a Seminar held at Jeddah under the auspices of Islamic Development Bank, Urdu translation whereof published in the two issues for the months of March and April, 1989 of his Urdu monthly journal Al-Balagh, Karachi, under the caption after referring to several Ahadith of the Holy Prophet (p.b.u.h.) observed that

202. The learned writer thus opined at the end of his paper that-

303. We may also refer to `Maqalat-e-Saeedi by Allama Ghulam Rasool Saeedi, Lahore, 1982, pages 470-71. He states :- 20.1. And, now, it needs to mention that the Islamic Fiqh Academy, formed in 1983 under the auspices of the Organization of Islamic Countries (OIC) represented by some 45 Muslim countries in its session held at Kuwait in 1988 has also disapproved indexation. The resolution of the Academy is reproduced as under: RESOLUTION N0.415 (09/88) CONCERNING CURRENCIES VALUES FLUCTUATIONS The Islamic Fiqh Academy (Jeddah) in its 5th Session held in Kuwait from 10 to 15 December, 1988; Having taken cognizance of the papers presented by the members and experts, on currencies values fluctuations, an listened to the discussions on this issue; Having taken cognizance of the Resolution No.9 adopted by the Academy Council during its 3rd session, in which, it is spelt out that Bank notes, being legal currencies, having full value, are governed by Shari'ah provisions applied on gold silver, in particular, for rules relating to Riba and Zakat and advance payment in general. The major custom in the-reimbursement of consolidated debt incurred in a given currency is to make the reimbursement in the same quantity of that currency and not in it, exchange value. It is not permissible, in fact, to gear debt, whatever the origin, to the price level. God is more Omniscient. (See Resolutions and Recommendations of the fifth Session of the Islamic Fiqh Academy held at Kuwait, 1988).

205. In the Second Seminar held at New Delhi of the Islamic Fiqh Academy of India, during December, 8-11-1989, issue of currency notes was also considered and it was, inter alia, resolved that-

206. An objection may, perhaps, be raised that in the days when Islam was ruling, gold and silver were; exchanged as commodity and the official coins made of gold and silver were used as currency, while in our days only paper currency is used in the entire world and, therefore, the argument based on the hadith may not perhaps be available. The reply to this objection is to be found in another article of Maulana Muhammad Taqi Usmani entitled as kagzi not aur currency ka hukam . The relevant portion appears at page 31 of tire issue of Urdu Monthly (Al-balagh) of November, 1958. It reads as under:

207. It now seems pertinent to refer to the view expressed by our learned brother Mr. Justice Wajihuddin Ahmad in his judgment reported as Aijaz Haroon v. Inam Durrani PLD 1989 Kar. 304 (relevant page 334) with respect to the repayment of loan on the basis of indexation due to inflation in equal value of the money borrowed in case the value of currency has decreased. He observed:-- " .it, humbly, appears to me that while a borrower or a purchaser as aforementioned, cannot be forced to return anything more than the amount due, he may not, at the same time and by the same token, be permitted to pay anything less than that which he, in the first instance borrowed or agreed to pay. There is authority, dating back from the days of our earliest Doctors, to the fact that where a contract of sale is concluded but payment is deferred and, subsequently, the legal tender loses its value, wholly of in part; the buyer is obliged, according to preponderance of view, to pay on the date, when payment becomes due, such amount, in terms of the current legal tender or in terms of gold and silver, which is equivalent to the real worth of the currency, which was the subject-matter of or for which the contract was concluded. Similar principle is applicable in relation to loans. Thus, if a person had borrowed money at a time when the value of money was at a particular level, in terms of purchasing power, and that value, discernably, diminished at the time of return, the borrower is liable to pay at least the equivalent of the real worth of the currency loaned out to him. In this behalf reference is made and reliance is placed on "Tambih Al-Raqood Ale Masail Al-Naqood" by Al-Syed Muhammad Amin Abidin Shami, compiled in 1230 A.H."

208. With all respect to the learned Judge for his legal accumen, as there arose a difficult case of first impression in our Courts in applying the principle of indexation to repayment of loans, we would like to observe that tire learned Judge, while placing his reliance on Ibn 'Abidin's work, has not referred to any specific text or its translation, of the most renowned jurist of thirteenth century Hijra. It is, in fact, an es8ay included in his book in two volumes popularly known as Rusail Ibn 'Abidin. In view of the importance of the subject we deem it proper to give a resume of the said essay which is as follows:-- If a person purchases cloth from another person in a prevailing currency and before paying the price thereof that currency is changed i.e. either it is demonetized and does not remain currency exchangeable in the market or its value is decreased or increased. In the first case the contract of sale becomes void because the price mutually agreed upon at the time of contract stood abolished. And in the second case the contract is valid and the purchaser will have to pay the same quantity of currency as was at the time of purchase, irrespective of its value at the time of payment. Similarly, if a person takes loan from another person in prevailing currency on deferred payment and then that currency is either demonetized and does not remain currency exchangeable in the market or its value is decreased or increased, in the first case the borrower will have to pay the value of the currency prevailing at the time of borrowing, and in the second case the borrower will pay the same quantity of that currency as was at the time of the borrowing, irrespective of its value at the time of payment. This is the view of Imam Abu Hanifah and the first view of Imam Abu Yusuf. But according to the second and the later view of Imam Abu Yusuf the purchaser/borrower will have to pay the value of the currency prevailing at the time of purchasing/borrowing in the currency prevailing at the time of payment. According to Oazi (Al Zahidi) the verdict will be given according to the view of Imam Abu Yusuf in the matter of loan and dower and according to the view of Imam Abu Hanifah in other matters. Imam Isbijabi has stated in Sharh al-Tahawi that there is consensus of opinion that in case of increase or decrease in the value, the same quantity will be paid as was at the time of borrowing. This has also been quoted in Fatawah Qazi Khan and is supported by Qazi Zaheeruddin. Allamah Ghazi al-Tamartashi has stated that in most of the authentic books of the jurists verdict has been given on the opinion of Imam Abu Yusuf. The same has been related in al-zakhirah and al-khulasah. This difference of opinion between Imam Abu Hanifah and Imam Abu Yusuf arises in case the loan has been taken in token coins like fulus which were usually debased or demonetized. But if the loan has been taken in pure gold dinar or silver dirham which were full-bodied money and were rarely debased or demonetized, then there is consensus of opinion that the same quantity will be paid as was at the time of borrowing irrespective whether its value is decreased or increased at the time of payment. Imam Abu Yusuf also agrees with the opinion of Imam Abu Hanifah in this respect. If the Government orders any decrease in the value of any currency, then, the loan taken in that currency before devaluation will be paid in the same quantity of the currency as was at the time of contract of borrowing/purchase, provided the currency is fixed and known, and if the currency is not fixed and known then the value of the currency prevailing at the time of contract will be paid, and if contract of loan has not been made on any specific kind of the currency and there are several currencies of that name prevailing in the market, then its payment will be made in such a currency which will not be more harmful to any of the contracting parties or according to custom. Some jurists opine that in this case payment should be made by mutual consultation and compromise so that none of them may bear any damage because the Holy Prophet (p.b.u.h.) said "no one should bear damage nor anyone should cause damage to another." (Tanbi al Ruqud 'ala Masa'il al-Nunud, published in Rasa'il Ibn Abidin, Lahore, Vol. II, pp. 66-67).

209. We have given the above resume so that there should remain no ambiguity as to the view of Ibn 'Abidin attributed to him and followed by the learned Judge in his abovementioned judgment.

210. The abovementioned book on which the Hon'ble Judge has relied for his conclusion does not seem to support his contention in so far it relates to loans. It will be appropriate to reproduce the relevant text of the book which is as under: (If a person has taken loan in currency then it is demonetised, the borrower will pay the equivalent of the real worth of currency loaned out to him. But the jurist concurs that if the currency is not demonetised but its value is either increased or decreased, the borrower will have to pay the same quantity as was borrowed by him). (Ibn'Abidin, Rasail, Lahore, Vol. 11, page 62).

211. The word `Kasid' means to become stagnant, dull, of no use. (E.W. Lane Arabic English Lexicon Book, Lahore, Part-7, page 2610). The word `Kasid' generally means dcmonetization or unpopularity. Thus if the currency in which loan has been taken is totally demonetized and is out of the transaction among the people, then the loan taken in it will be paid in its equivalent value but if the currency is not totally demonetized and is still current in the currency market or its value has increased or decreased, the loan taken in it shall be paid in the same quantity in which it was borrowed. In this connection Ibn Qudamah writes: (In case the amount of loan is in terms of Lulus or smaller pieces of a dirham (mukassarah) which the Government (sultan) has banned and which have become out of currency, the creditor will take its price. He will not be compelled to accept this coin ....because the defect has occurred when the coin was in the borrower's possession . ....The price of the fulus will be fixed as was prevailing on the date of borrowing and the creditor will take it irrespective of the degree of decrease in its value. But in case the coin (lulus), in spite of demonetization, is still in currency and popular, the creditor shall accept the same." (Ibn Qudamah, Vol. IV, page 325).

212. Continuing our discussion on the above-cited judgment (PLD 1989 Kar. 304), we would like to refer to the observations on the said judgment by Dr. S.M. Hasanuz Zaman, Chief of the Islamic Banking Division of the State Bank of Pakistan, presented by him in his learned monograph "INDEXATION .OF FINANCIAL ASSETS"

An Islamic Evaluation", which he has very kindly submitted to this Court. In fact, the 'learned author has added his observations on the said judgment as "EPILOGUE" to the said monograph which seems to be part of a book, perhaps, ready for Press. We cannot do better than to reproduce the same as under:-- "As pointed out in the Preface a learned Judge of the High Court of Sindh has decreed for indexing a financial liability in terms of purchasing power of money that was advanced to a Finance Company a few years ago. The Decree published in 33 pages touches upon delicate constitutional arid legal issues and religious injunctions to disallow the payment of interest on deposits and grants relief to the depositor by way of compensation for a fall in real value of money that had occurred during the period of deposit. Constitutional discussions are outside the scope of the book. We, however, reproduce here the relevant portions of the decree that contains the main arguments. This will be followed by an examination of the main points:

"Para.

59. It is manifest that grant of interest is directly prohibited under the .injunctions of Quran itself. However, a modern society is beset with the evils or ill-effects of the prevalence of an economic order where paper currency happens to be in vogue and holds the field as correct legal tender. This has given rise to violent changes in the value of such legal tender and a common ailment of such a monetary system in its being constantly subject to what has been termed by economists as "inflation" or erosion in the buying power of the paper currency from time to time and, on occasions also "Deflation", as was experienced during the great depression of the thirties. Question, therefore, arises whether, in such circumstances, a borrower or for that matter, a purchaser in a sale, subject to deferred payment, is liable to return or pay only that count in terms of the paper currency which he borrowed or agreed to pay when such a deferred payment, as aforesaid, fell due. It would be appropriate now to quote Verse 7, Surah Al-'Imran, relating to the interpretation of the Holy Qur'an which ordains: "For its (Qur'an's) hidden meanings, but no one knows. its hidden meanings except Allah and those who are firmly rooted in knowledge ...... To Hazrat Ali, as reproduced in Nahajul Balagh, (Khutba 194, page 248), is attributed the under-noted golden saying: "Our philosophy and our preaching could only be understood by superior minds and sincere hearts." Guided by the quoted verse in Surah `Al-Imran' and the dictum of Hazrat Ali abovementioned, it, humbly, appears to me that while a borrower or a purchaser, as aforementioned, cannot be forced to return anything more than the amount due, he may not, at the same time and by the same token, be permitted to pay anything less than that which he, in the first instance borrowed or agreed to pay. There is authority, dating back from the days of our earliest Doctors, to the fact that where a contract of sale is concluded but payment is deferred and, subsequently, the legal tender loses its value, wholly or in part, the buyer is obliged, according to pre-ponderance of view, to pay on the date, when payment becomes due, such amount, in terms of the current legal tender or in terms of gold and silver, which is equivalent to the real worth of the currency, which was the subject-matter of or for which the contract was concluded .[ The remark seems to refer to the case involving the payment of fulus or any currency that is not a legal tender. For examination of this argument see infra.] Similar principle is applicable in relation to loans. Thus, if a person had borrowed money at a time when the value of money was at a particular level, in terms of purchasing power, and that value, discernibly, diminished at the time of return, the borrower is liable to pay at least the equivalent of the real worth of the currency loaned out to him. In this behalf reference is made and reliance is placed on "Tanbih Al-Ruqud Ala Masail Al Nuqud" by Muhammad Amin ibn Abidin Shami, compiled in 1230 A.H. (see pp.58-68 of Majmua Rasa'li ibn 'Abidin, Vol. II, Reprint Lahore, 1976). "Para.

61. Viewed in the foregoing light it is obvious that in their official pronouncements the Federal Government of Pakistan and its various agencies and the State Bank of Pakistan have neither been wanting nor slow in acknowledging, officially, in instruments, as sacrosanct as budgetary provisions and official publications, that inflation is rampant in the country. All efforts to keep it in check and to maintain the intrinsic value of the rupee have failed. Thus what was borrowed some years back if it is ordered to be returned on the basis of the same count would result in manifest injustice to the creditors inasmuch as that which will thus be returned would not have the same intrinsic value and buying power as it possessed, at the time of grant of loan. "The law of Allah does not brook injustice of any kind and, therefore, whenever a case for payment, for refund of return of money, comes before a Court of Law in Pakistan. it has to be the endeavour of that Court to order the payment, refund or return, as the case may be, of so much of current legal tender to the person entitled as is equal, in terms of buying power or other intrinsic value, to the amount initially loaned out, contracted to be paid, or deposited. "Para

63. This brings me to the crucial question as to how equity is to be done between the parties. For obvious reasons no rule of thumb is available to determine the extent of erosion, which the principal sum due, and earlier decreed in this case, has suffered till the date of payment, if any, or the decree. Such matter as a rule involves application of detailed accounting procedures based on official data on the subject. Simple decree on the basis of the aforequoted statistics may not do. The case, therefore, in principle, calls for a Preliminary Decree, if one can be passed under law. This, however, does not imply that where smaller amounts or periods are involved a given case cannot be disposed of on, approximations. "Para.

65. I would, therefore, grant in this case to the plaintiff a decree of a preliminary nature for assessment as to what was the equivalent real worth of the money which was initially borrowed, that is to say, of the sum of Rs. 5,00,000 as payable on 20-5-1984, the amount and date reflected, as they are, in the Promissory Note in suit. For this purpose and in order to make accurate assessment I would appoint a Commissioner to do the needful and for that purpose the Commissioner would be entitled to seek assistance from the relevant functionaries of the State Bank of Pakistan . [ PLD 1989, Vol. XLI, pp.334-336, Aijaz Haroon v. Inam Durrani, decreed by Mr. Justice Wajihuddin Ahmad, Sindh High Court. (Reproduction of relevant portions only).] Examination of Sharia arguments:

213. The paragraphs reproduced in the above lines adduce a Qur'anic Verse, a saying by Pious Ali (Allah be pleased with him) and reference to a booklet written by a celebrated jurist of 13th Hijra century, generally known as Ibn Abidin Shami.

214. Before examining the Sharia interpretation of the above passages it would be worthwhile to reproduce a summary of the points discussed in the booklet referred to in the Decree. The booklet discusses the liability of payment under situations of demonetization, debasement, fluctuation in value of the coin monometallism and bimetallism and reproduces the opinions of earlier Ulema on the issue some of which we have already given in the foregoing pages. The case of demonetization.

215. In case a person purchases something for the currency which, before making payment, is changed would have either of two effects: (1) In case this money is not in circulation the contract would be voidable. The reason is that in a contract of sale both nature and amount of goods and money should be specified undisputably. In the event of destruction of goods before it is delivered or of money before it is paid the contract of sale will become ineffective. Thus in the event of non circulation of the contracted unit of money the contract of sale would become voidable because[Explanatory portion in parenthesis is added by the author.] money is destroyed. (2) In case this money is in circulation but is depreciated in value the contract will not be invalid because money is not destroyed. As a result the seller will have to accept the same money.

216. According to Zahidi in case a person sells something for a specific amount of money in circulation but afterwards that money is demonetized the contract of sale will become invalid. Therefore, the purchaser shall return the goods if it is intact. But in case the goods is consumed or is transformed into a different form he will return the like of it if the goods are fungible for if otherwise, the price of the goods in terms of current money equivalent to the value of money that prevailed on the day goods was delivered to him.